Star Tribune: Gen Y-ers got the message from recession
Twenty-somethings are coping with the recession by reining in spending and growing more risk-averse, setting the stage for lifelong behaviors.
Like many of us, Ashley Frerich of Marshall, Minn., scaled back this Christmas, setting a dollar limit for presents and buying everything on sale. But several studies have shown this super-sized recession will affect young people long after the holiday season fades and the new year begins.
Four in 10 workers in their twenties and thirties are more conservative because of the recession, a recent study from Fidelity Investments found. In a paper published last year, Stanford Prof. Stefan Nagel and University of California, Berkeley, Prof. Ulrike Malmendier explained that the economic environments people experience in early adulthood influences their lifelong investing behaviors. They found Generation Y will likely invest less in stocks and take fewer financial risks because they experienced a major recession as young adults.
In the past, 20-somethings were the group most likely to be investing 100 percent in stocks because they're young and their time horizon is long. I'm sure some are still invested this way. But one big, fat stock market downturn later, and young people are singing a different tune, even though the market has rebounded nicely. …
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