Here & Now

UW's Soyeon Shim on Financial Security for Young Adults

Frederica Freyberg:

In economic news, while statistics still show a better earning future for those who have a college degree new research reveals that recent college grads struggle financially, about a half of them. A study launched at the University of Arizona shows that even with full-time employment college grads are still relying on family support to make it. The study’s original investigator is now the dean at UW School of Human Ecology. Soyeon Shim joins us now. Thanks very much for doing so.

Soyeon Shim:

Thank you.

Frederica Freyberg:

This study, I understand, of 18 to 25-year-olds and their financial situation is in its six year, longitudinally.

Soyeon Shim:

That's right.

Frederica Freyberg:

Have things gotten better or worse over that time for this age group?

Soyeon Shim:

I think this age group is very interesting because when we launched this study, this was prior to economic downturn. So we had this data set when they were freshman. It was a booming time. Everybody were having a great time, and then boom, economic impact happened a year later. So we had a dataset that students came and reported to us about their financial habits and behaviors in a good time. But a year later we had, obviously, an economic earthquake, and then we followed them again. So we’ve seen, you know, where they started, and went down dramatically and then came back. But yet, obviously, a way to go.

Frederica Freyberg:

So it has come back, but they still struggle.

Soyeon Shim:

Absolutely.

Frederica Freyberg:

What do you attribute that to mostly?

Soyeon Shim:

I think that this is not just this core group. It is a time in our time where young adulthood, in the past when you graduate from college or even high school, you start your career, get married, have a family. Now, today, it is taking a longer time for our young people to become financially independent. So what used to take four or five years, now may take five to ten years. Those students are either going to college, graduate school or relying on parents and working on part-time positions until they became self-sufficient. These are actually affecting, in some way, how we now lead our life. Because becoming sufficient is becoming more difficult for young people today than past generations.

Frederica Freyberg:

And what are the main drivers of that? Is it that they can’t get jobs, good jobs, that jobs are paying less than they maybe did before the big economic crash? Or student debt? Or is it kind of a combination?

Soyeon Shim:

All of the above. Yes, the student debt obviously, and when you don’t have a job and not being able to pay off that debt, is creating a huge stress for young people. And that delays, obviously, their life plan. But also, economic situation is such that the national data for college graduates for unemployment rate is 8%. And that is obviously affecting, and under-employed. College students, now we know that if they’re employed, they’re under-employed, a lot of them. That’s part of it.

Frederica Freyberg:

What about the stress that then it puts on the other family members? Presumably the parents, possibly grandparents, who have to help this age group. So it kind of stretches out the financial stress across the generations.

Soyeon Shim:

That’s right. The parents of our generation today are either helping their parents or helping our children. It's sort of a sandwich generation, obviously. Yeah, so that’s the one reason there were a lot of young people move back to their parents’ home.

Frederica Freyberg:

How can young people offset these issues?

Soyeon Shim:

I think that having a really realistic goal. And often what we found is students that have a plan, planning horizon is what we call it, plan ahead and anticipating when they come out, and stick to the plans. And being aware of what financial stability means. That is what’s important, that's what our study is telling us, that those students are doing very well regardless of socio-economic background. It's not about the whether the student's has a wealthy family or not. Students, in general, those who plan ahead, have realistic goals and are trying to achieve that goal do better.

It’s not just about the amount of money, but it's about what you do with your life and time and having that clear plan, rather than going into debt. Is this that is going help me accomplish my goal? And that is the kind of conversation that needs to take place as opposed to just going to school without realizing three or four years later what you’re going to do with that.

Frederica Freyberg:

I read that those who view money as a mechanism for self-fulfillment rather than the end goal are happier. How are those two views different?

Soyeon Shim:

We often think happiness is money, we correlate that with an amount of money. But what we've found is that the students who plan to do something with their money and time, and follow through with that their plan tend to do better. Even during the economic downturn there is a plan to save, and actually did save, and that a follow-through, intentional activities leading to accomplishing that goal. They tended to do better in all aspects of their life whether academically, psychologically, physically, and relationship-wise and overall happiness. One of the researchers in European countries found that those who even have $350 in a savings account are much happier than those who don’t, but make a lot more money. It is the money that you have or the fact that you have a savings account. It isn’t the savings account, but the fact that you do have a planned life, you do have a plan for the future. So that’s planning horizon and following through with your plan, that's what makes people feel secure and help them accomplish their goals.

Frederica Freyberg:

That’s awesome. All right. Thank you Soyeon Shim. Thanks for joining us.

Soyeon Shim:

Thank you so much.