If I started talking about car engines, say I mentioned “dual overhead cams,” would you be able to understand what I was referring to? Maybe you are a mechanic and know what I’m talking about. Maybe you are a car enthusiast and know it too. Or maybe you’re just like me and had to Google what that meant and look at an animation to see how it works.

Even though we’re not car experts, we use cars every day for everything in our lives. Now, I know this will sound a bit hyperbolic, but bear with me for a moment: This is exactly how the average Joe and Jane feel about their finances. They don’t know the vocabulary, and they know even less about how financial products work. What most of us know is how to make some money and how to spend it with the click of a button.

People who don’t have a financial advisor and are overly confident in how to handle their personal finances could end up hurting themselves in the long run. And this overly confident mindset is precisely the one that many Gen Yers and even some baby boomers have, according to a recent report on LearnVest, a financial planning company.

The report reveals that — across all income levels — those under 25-years-old feel confident about their financial future and potential earnings, 30- to 40-somethings were less confident, and in 55-year-olds and older, that confidence seemed to return, in what they call the “U-curve” trend or the “confidence curve.”

The report was based on data from people who joined LearnVest: 65 percent were females from all 50 states, with the heaviest concentration on the east and west coasts, and 45 percent were married or partnered. Since their survey demographic was mostly women, LearnVest also explored other research and discovered that their report is in line with certain behavioral economists (for example, a study from Dartmouth College and Warwick University).

LearnVest spotted a trend in happiness between their report and these universities’ findings: “Happiness and life satisfaction are U-shaped in age…well-being reaches a minimum, other things held constant, round the age of 40. Not only has this happiness curve been demonstrated by extensive data from the United States and Europe, but data from 72 countries corroborates the trend,” says LearnVest’s report.

But how does that explain that people in their twenties are more confident about their finances than 30- and 40-somethings? On what are they basing their overconfidence? The report cites that it’s due to earning power, since income generally increases over time, specifically an 111 percent from the under-25 age bracket to the 25-34 bracket.

After that initial growth, the income growth rate slows to 33 percent between the 25-34 bracket to the 35-44 bracket, according to the report. For the 55-64 age bracket, the income growth rate hits a -6 percent “likely due to near-retirees leaving their positions as they prepare to retire full-time.”

To learn more about overconfident people and how to manage their financial expectations throughout the different life stages, keep reading.

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Overconfidence and youth

Even though millennials in their early twenties have fewer financial obligations (which makes this an ideal situation to start investing in their retirement), the report says that the data reveals few are saving money. Click or tap the image below to enlarge.

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“Just because people under 25 are saving less, doesn’t mean they haven’t thought about it,” the report reveals. They also quote a 2012 CFP Board of Standards and Consumer Federation of America study in which nearly 6 in 10 of those under 25 think they’re in OK shape or can start saving for the future. “When we look at those under 25, it may be that we’re looking at a case of false confidence — with few current responsibilities and without a clear notion of what’s on the horizon, they may be missing out on the opportunity to establish a savings habit early,” the report says. As the saying goes, “Time is of the essence.”

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Married, increased income, but confidence slips

Planning for a wedding or buying a house requires a lot of saving and financial wrangling. That is what might be happening to some people between the ages of 25 to 34. At the same time, they are also experiencing the biggest income increase in their lives. (Click or tap the image below to enlarge.)

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LearnVest does caution that even though their income has increased, so have their expenses and not their savings, contrary to what advisors might encourage. “We see a bit of an ‘I’ll cross that bridge when I get to it’ mentality, giving this age bracket a continued sense of false confidence,” the report says. Meanwhile, their confidence slips a little, while their income increases.

See also:

Women and retirement: 4 key findings

family

Household grows – income doesn’t = confidence dips

Those 35 to 44 experience an increase in all expenses as their family grows, while long-term goals like retirement are competing with other goals, like college funding. With a moderate 33 percent income growth, versus the previous 111 percent jump, financial confidence dips even more, the report says. (Click or tap the image below to enlarge.)

See also: Surprise! 5 retirement party crashers

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retirement savings

Retirement savings take center stage; low financial confidence

While income growth stalls at 1 percent and expenditures rise slightly, saving for retirement now becomes a priority as the retirement age is already visible on the horizon. Surprisingly, the data also points to buying a new car as another financial priority. This makes the 45 to 54 age group wonder how they are going to meet their tight financial deadlines, making financial confidence slip again.

It’s only after age 55 that the data shows confidence creep back up, as people in that 55+ age group pay off their financial obligations and their kids move on with their lives. (Click or tap the image below to enlarge.)

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The study ends with an interesting proposition to rewrite the confidence story: “If those confident 20-somethings had a better sense of what the next 10, 20 or 30 years might look like from a financial perspective and could better prepare, perhaps the reality check wouldn’t be so surprising. Could foresight be the confidence cure?”

The study even gives a plausible way to tackle the confidence dilemma and change it from a U-curve to a steady line upward: If financial confidence is defined as how people feel about their money and their ability to meet their financial responsibilities, confidence would increase if people feel prepared for what lies ahead by planning. One way to do that is to take a page from the wellness industry, “Which has made it mainstream for people to care about both their current and future health,” and imitate their model to create a financial health plan.

See also:

34 ways to sell an annuity

8 reasons you should be selling to Generation X

Learning retirement lessons from millennials