EARLY ADULTHOOD: THE PURSUIT OF FINANCIAL INDEPENDENCE

Introduction to Early Adulthood

Early adulthood is the transitional life stage when people seek to establish independence. This report explores the pressures faced by today’s early adults, technology-driven “fear of missing out” (FOMO), the student debt crisis, and financial support from parents. Our research uncovered key trends and new insights, including the ripple effects of indebtedness, the power of intergenerational interdependence, and how women are outpacing men in the quest for financial independence.

A Complex Matrix of New Choices

Eight in ten early adults say they have more choice than previous generations did in determining who they want to be. The multitude of options coupled with 24/7 access to information and social media is adding new pressures to people going through this lifestage. Nearly half admit to feeling addicted to social media, and 68% say they regularly grapple with FOMO, or “fear of missing out” on what they see their peers doing.

The pressure is felt across multiple fronts with the majority saying they feel pressure to make a lot of money, find a better job, buy a home, and get married. They also tell us that finances are their number-one source of stress and that lack of money is the number-one barrier to achieving their goals in life.

The Struggle to Be Debt Free

Today’s early adults define financial success as being debt-free. Freedom from debt seems a low bar of accomplishment, yet it’s an elusive goal for many early adults. Eight in ten early-adult households carry some form of debt, most commonly education and credit card which were also the top two reasons why one-in-four early adults with a retirement account had already made a withdrawal.

Student debt is having major ripple effects on early adults’ futures, financially and personally. Early adults are delaying home buying and starting families. The ripple even reaches retirement years—indebted graduates are contributing only about half the amount to their 401(k)s compared to those without debt.

The Family Bank Is Open

Seventy percent of early adults have received support from their parents in the last year, and more than half of those in their early thirties continue to receive some support. The aggregate amount spent by parents on their early adult children sums to $500 billion annually.

One in four early adults boomerang back home to live with their parents. Yet parents seem to enjoy having their children home. Seventy-eight percent of boomerangs and their parents saying the benefits outweigh the disadvantages of living together.

The family bank ultimately operates in the larger context of intergenerational connection and interdependence. Eighty-nine percent of early adults say they would be willing to support their parents financially in the future.

Young Women Launching Faster Than Men

Today’s early adult women are coming out on top despite facing multiple headwinds. For every 100 men graduating today, there are 141 women. However, they hold greater levels of student debt, continue to face a wage-gap, and are more likely to take on family caregiving roles.

Among younger early adults, ages 18-24, men and women are equally likely to be receiving support. However, among those ages 30 and over, men are nearly twice as likely to be receiving support in every category. Women also believe more strongly than men that parents’ continued financial support for older early adults is a bad idea, a belief that they are demonstrating through their actions.

Background – Methodology

This research is based on a nationally representative survey of over 2,700 adult respondents in the U.S., with a focus on Americans ages 18-34. The survey fielded in October 2018, conducted by Merrill Lynch in partnership with Age Wave and executed by Kantar TNS. Additionally, two focus groups were conducted in June 2016 where qualitative information was gathered.