Problem: Each generation has its own unique set of financial experiences and expectations. To target their services appropriately and effectively frame conversations with their clients, financial practitioners need to be generation-savvy and understand the biases of clients at different ages and stages of the life cycle.
Research-based Solution: A study of financial decision-making of primarily young adults explored four key financial decisions: financial goals, homeownership, retirement planning, and student loans. Based on the results of analyses of both qualitative and quantitative data, many respondents were living a postponed financial life – planning to complete one financial goal before moving on to the next goal. Financial practitioners can help clients, especially young adults, understand that it is possible to pursue multiple financial goals concurrently and that the order in which goals are combined can make a big difference over a young adult's lifetime.
In Real Life: Planning is a key factor in achieving financial goals. To meet their goals, most people need to work on more than one goal at a time. The order that goals are worked on also matters. For example, repaying students loans AND ALSO putting aside something for retirement even if that means waiting to buy a house. Those who focus on first paying off student loans, then saving for the down payment on a house, and only start saving for retirement after the first two goals are achieved will likely have less set aside for retirement than someone who started regularly saving smaller amounts earlier.
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Research at a Glance
Citation: O’Neill, B., Xu, Y., Johnson, C., Kiss, D. E., & Buyske, S. (2019). “As Soon As…” Finances: A Study of Financial Decision-Making. Journal of Personal Finance, 18(1).