“Today, many young Americans are struggling to save for the future while paying off their past,” said Tom Butch, managing director of retail distribution at TD Ameritrade. “Between paying down student loans, contributing to retirement and saving for their children’s college, they are striking a delicate balance to set themselves on a path to long-term financial security.”
Financial disruptions: cause and effect
Education spending is the leading financial disruptor among Americans in 2019, and of the surveyed disruptors, it’s also the only one to experience growth in the last five years. In 2014, loss of employment and poor investment/business performance significantly outstripped education as sources of disruption.
“The cost of education has risen proportionally as a source of disruption, as low unemployment and strong market performance seem to have blunted what were the greatest concerns five years ago,” Butch said.
Financial disruption causes, ranked:
1. Education for self and/or dependent family members (e.g., student debt): 16%
2. Loss of employment/lower paid job: 15%
3. Supporting others financially: 13%
4. Poor investment/business performance: 10%
5. Accident/illness/disability/unable to work: 10%
6. Divorce/separation/widowed: 10%
7. Planned family: 9%
8. Planned home: 8%
Millennials are the most financially disrupted generation — they’re the most likely to experience financial disruptions across nearly every category.
Supporting others financially is by far the most financially impactful disruption, resulting in 80% lower median monthly savings/investments.
The financially disrupted: then (2014) and now (2019)
Financially disrupted Americans feel more prepared for a financial disruption in 2019 than five years ago:
48% in 2019 had a steady, reliable income vs. 40% in 2014
45% in 2019 had money/savings put aside “for a rainy day” vs. 33% in 2014
25% in 2019 had to stop saving/investing for the long-term/retirement vs. 38% in 2014
20% in 2019 had to withdraw money from their retirement savings in 2019 vs. 26% in 2014
However, more than half of disrupted Americans (56%) are still behind on their long-term financial goals.
Financial consequences of disruptions are lasting 33% longer than five years ago, on average (in 2019, Americans noted that disruptions lasted six years and three months vs. four years and eight months in 2014)
The threats ahead
Looking to the future, Americans most fear increased cost of living (47%) and healthcare (44%) as threats to their financial security and long-term investing.
Millennials consider increased cost of living as the No. 1 threat (44%) to their financial security and long-term investing.
Gen X (49%) and boomers (51%) worry more about the increased cost of healthcare.
Millennials are the most concerned about job loss due to automation (19% vs. 14% of Gen X and 6% of boomers).