According to the Wall Street Journal:
Generation Y's finances are much worse off than those of people their age 20 years ago, according to a study commissioned by the American Institute of Certified Public Accountants. Americans aged 25 to 34 had a median net worth of $3,746 in 2004, down from $6,788 in 1985. Their average debt climbed to $4,733 from $3,118, respectively.
More from that study:
- Their average credit-card debt is $4,088.
- Their average student loan is $20,000.
- They spend 24% of their income just on debt payments.
- They have the second highest rate of personal bankruptcy in the nation.
- The number of people in this demographic maintaining an interest-bearing savings account is declining to 47% in 2004 from 61% in 1985.
Hmmm. Savings accounts are a boneheaded financial move for most people. It's true that savings accounts are accruing more interest right now than in previous years, but even when interest rates are high, keep in mind that you pay into savings accounts with post-tax dollars, and that interest earned on those dollars is also taxable. In contrast, you make contributions to 401(k)s with pre-tax dollars, and the capital gains grow tax-free as well. Even if you need liquidity -- which 401(k)s don't offer -- you'd still be better off putting your money into CD's (certificates of deposit) with staggered maturity dates or into money market accounts. Better to take a pass on the savings accounts.