From lack of insurance to bad password protection, young workers are at risk.
Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…
The interesting study
When you’re young, you think you’re invincible. You take risks and do things that older people might consider crazy, but you’re young and that’s just what youth do.
That kind of philosophy is usually thought to apply to things like skydiving, driving fast, doing extreme sports, and partying hard. But a new report from the experts at Chubb Personal Insurance finds that high-risk attitude may even extend into the financial realm for young professionals.
The big result
“Young professionals” – defined in this study as anyone born between 1981 and 1992 – are leaving themselves dangerously under-protected from a variety of financial threats. From identity theft protection to insurance, these young professionals just aren’t taking the right steps to keep their financial interests safe.
The fascinating details
First the study brought to light some surprising statistics about young professionals as a group. While many in older generations think most youth are moving home and still struggling to find jobs, in reality that’s only a minority of the group.
- 36% of those born between 1981 and 1994 have moved back home
- Only 14% of the group was unemployed as of February 2015
The study points out that at the same time, 15 million Americans born after 1980 have incomes over $100,000 – but even those who are affluent are often still practicing the same risky behaviors.
Here are the practices that would make risk managers and financial advisers cringe:
- 20% of young professionals have never changed the password for their online bank account, putting them at high risk of identity theft.
- This practice may contribute to the fact adults 20-29 filed the most complaints with the FTC from 201-2013.
- 61% of affluent young professionals – along with 55% of young millionaires and 52% of the ones with ultra-high net worth – believe in using Facebook and other social platforms to build their personal brand, putting them at risk of allowing personal lives and opinions affect their professional lives.
- 60% of young professionals also post product and business reviews online – again, a risk for reputation online.
- While 70% of young professionals want to visit every continent, 78% have never bothered purchasing travel insurance.
- 62% of young professionals believe the sharing economy is appealing, despite the risks.
The most telling statistics, though? Only 12.9% of these affluent young professionals have insurance to protect their assets. Further, they tend to distrust traditional banking and investments, which may explain why they have 52% of their assets in cash and only 28% in stock.
What you can do
“There are several issues at play here that really all boil down to proper risk management,” says Gary Herman, President of Consolidated Credit. “The philosophy that bad financial outcomes only happen to other people could land these young professionals in a tough situation if they don’t start to acknowledge the need to protect themselves against potential threats.”
The following steps are good to take no matter your age or income level:
- Follow at least basic best practices for identity theft prevention – change your passwords at least once every year. Ideally you should change them more often than that, but even a yearly change is better than none at all.
- Never forget the Internet is a public space. And while people may be pushing for the right to be forgotten online, at least right now anything you say or post online isn’t going away easily. Avoid rants, attacks, trolling and other less-than-attractive online behaviors so your online persona doesn’t negatively affect your professional life.
- Review your insurance policies at least once each year. This is something most of us rarely do and it not only leaves your assets unprotected, it also leaves money on the table that could be better used elsewhere. Take time to comparison shop to make sure you wouldn’t be better off with a different company, or at the very least call your agent to review your policies and make sure you’re protected.
- Diversify your assets so you’re not stunting the potential growth of your money. While lesson many Millennials took away from watching their parents lose big in the Great Recession was to avoid banks entirely, the real lesson is that assets need to be diversified as much as possible. Having all your long-term financial stability tied up in high-risk stocks or having all of your retirement assets in mutual funds is a risky proposition. The more you diversify, the more likely you are to weather a financial storm.