From the December 2006 issue of Investment Advisor • Subscribe!

Young Spendthrifts

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Young people are not saving for their future. Drs. Christopher Thornberg and Jon Haveman of Beacon Economics, based in Los Angeles, released a study in October on behalf of Feed the Pig, a national public service campaign sponsored by the AICPA and the Ad Council (www.FeedthePig.org), that aims to educate 25 to 34 year-olds on "the need to take better control of their personal finances." The study's findings are alarming.

Using data collected from the Survey of Income and Program Participation performed by the U.S. Census Bureau this past June, the study looked at the savings behavior of America's youngest workers. According to the study, the median net worth of Americans in the 25-34 age group is significantly lower than it was 20 years ago, despite increases in income that led to a slight increase in the average net worth. Additionally, the proportion of this population that possesses a savings account or other financial assets has declined significantly from 65% in 1985 to 55% in 2004.

It's apparent from the statistics that this generation needs the motivation to be more financially responsible about their future. "We hope people will start to learn and understand what liabilities they will have in the future," says Thornberg. "People tend to live for today and don't realize that even if you don't retire, you will be facing higher taxes. They don't look far enough into the future." --Kara P. Stapleton

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