Financial Confidence

Financial 

Confidence 

Examining the U-Curve—and How We Might 

Improve the Confidence Trajectory 

1 Financial Confidence: Examining the U-Curve—and How We Might Improve the Confidence Trajectory

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Financial Confidence 

and the Workplace 

Financial stress in employees’ personal lives can 

have significant ripple effects in the workplace, 

including declines in productivity, focus and 

performance. A variety of recent studies have 

explored the extent and impact of financial stress 

in the workplace. Studies have also looked at 

companies that have started adding financial 

wellness programs to their benefits package to 

help improve employee engagement—and, ideally, 

their bottom line. 1 

In this whitepaper, we examine an interesting 

trend in how people feel about their finances 

over time. While it might be assumed that 

financial confidence increases with time—along 

with wisdom and salaries—our research found 

the opposite. Specifically, we explore the sharp 

decline in confidence after age 25, and how 

increased financial responsibility paired with 

stagnant income growth can culminate in a crisis of 

confidence for people in their mid-30s and 40s. 

By illuminating what may hinder financial 

confidence across a range of age groups, this 

report can help provide a deeper understanding 

of how we might approach financial wellness in 

the US, thereby mitigating the negative effects of 

financial stress. 

7 out of 10 workers say 

financial stress is their most 

common cause of stress 2 

In 2012, about 1 in 5 

employees admitted they 

had skipped work in the past 

year to deal with a financial 

problem 2 

Over 60% of human 

resource professionals say 

financial stress is having an 

impact on employee work 

performance 2 

55% of employers believe 

financial wellness leads to 

greater productivity 3 

26% of small companies, 43% 

of medium companies and 

46% of large companies have 

a financial wellness strategy 

in place for their employees 

or plan to add one in the next 

two years 3 

1 

Data is from 9/1/2013–7/15/2014 and aggregate 

of 78,717 users. 

2 

Consumer Finance Protection Bureau Report, 

Financial Wellness at Work (August 2014), 

available at http://www.consumerfinance.gov/ 

reports/financial-wellness-at-work/ 

3 

Bank of America Merrill Lynch Workplace 

Benefits Report (December 2013), available 

at http://benefitplans.baml.com/ir/pages/ 

workplace-benefits-report.aspx 


Contents 

4 

5 

7 

8 

11 

14 

14 

16 

17 

18 

19 

Introduction 

The confidence gap 

A pattern emerges 

A closer look at earning power 

Responsibility on the rise 

A detailed look by decade 

Under 25: “The young and free” 

25–34: “The upwardly immobile” 

35–44 “The spread thin” 

45–55 “The light at the end of the tunnel” 

Summary and final notes 


Introduction 

How do people feel about their finances? While 

it might be assumed that financial confidence 

increases with time—along with wisdom and 

salaries—LearnVest research found the opposite. 

In this paper, LearnVest looks at data from our 

own members, statistics from the U.S. Bureau of 

Labor Statistics, and several recent studies to try 

to answer the confidence question. Specifically, 

we examine the sharp decline in confidence after 

age 25, and how increased financial responsibility 

paired with stagnant income growth can culminate 

in a crisis of confidence for people in their mid- 

30s and 40s. In delving into the root causes, we 

also begin to explore how the financial planning 

industry can help rewrite the confidence story. 


The confidence gap 

Does financial confidence grow as people get 

older (and presumably wiser)? Our internal 

research involving individuals signing up for 

LearnVest found that new clients’ confidence in 

their finances actually demonstrated a U-curve. 

While those under 25 generally felt very confident 

about their finances, 30- and 40-somethings were 

significantly less confident. In the 55 and older 

brackets, confidence starts to tick up again. 1 

60% 

Confidence by age across income levels 

50% 

40% 

30% 

20% 

Under 

25 

years 

25-34 

years 

35-44 

years 

45-54 

years 

55-64 

years 

65 

years 

and 

older 

Source: LearnVest 


Curious about whether income played a role in 

financial confidence, we then looked at confidence 

across income brackets. We found that the U-curve 

trend still holds true across most income levels. 63% 

of people in their 30s making between $70,000 and 

$100,000 annually stated they don’t feel good about 

their finances. 2 

Confidence by age within income brackets 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

18-24 

24-34 

34-44 

44-54 

54+ 

18-24 

24-34 

34-44 

44-54 

54+ 

18-24 

24-34 

34-44 

44-54 

54+ 

18-24 

24-34 

34-44 

44-54 

54+ 

18-24 

24-34 

34-44 

44-54 

54+ 

18-24 

24-34 

34-44 

44-54 

54+ 

Under $30,000 

$30,000-$50,000 $50,000-$70,000 $70,000-$100,000 $100,000-$150,000 $150,000 and above 

Source: LearnVest 


A pattern emerges 

The confidence curve we found was based on 

data from people who had just joined LearnVest. 

Our group of respondents was 65% female, 

from across the United States (with the heaviest 

concentration from the east and west coasts) and 

45% are married or partnered. 

In order to mitigate the impact our somewhat 

skewed demographic had on our analysis, we 

explored similar research to understand the 

broader context of the U-curve. We discovered 

that the trend revealed in our own data is 

also in line with the work of certain behavioral 

economists, who have noted similar trends in 

researching happiness. A study out of Dartmouth 

College and Warwick University, for example, 

found that “happiness and life satisfaction are 

U-shaped in age...well-being reaches a minimum, 

other things held constant, round the age of 

forty.” 3 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. 4 (We should note that while 

the LearnVest data was analyzed by cohort, similar 

studies have found that “the U-shape seems to be 

unaffected by cohort influences.” 5 ) 

With supporting evidence for the U-curve in the 

broader context and other data sets, we set out 

to understand what causes financial confidence to 

nose-dive over time. 


A closer look at 

earning power 

Larger market factors aside, a person’s income 

generally increases as he or she gets older. 

People who have been in the workforce longer 

have more years of experience, and their salaries 

tend to rise along with their duties and titles. 

Average income over time 

$90,000 

$75,000 

$60,000 

$45,000 

$30,000 

$15,000 

$ 

Under 

25 Years 

25-34 

Years 

35-44 

Years 

45-54 

Years 

55-64 

Years 

65 Years 

and older 

Source: Pre-tax income from the BLS “Table 1300. Age of reference person: Annual expenditure means, shares, standard errors, 

and coefficient of variation, Consumer Expenditure Survey, 2013” 


So why do people in their early twenties—a 

demographic that currently faces more student 

loan debt than previous generations before them, 

and who for the most part are only just entering 

the workforce 6 —still appear to be more confident 

about their finances than their higher-earning 

counterparts in their thirties and forties? A closer 

look at earning power over time may offer more 

insight. National income data shows that while a 

person’s income generally does increase over 

time, income growth rates actually decrease 

dramatically over time. 

Average income over time and income growth rate over time 

$90,000 120% 

$75,000 90% 

$60,000 60% 

$45,000 30% 

$30,000 0% 

$15,000 -30% 

$ 

Under 

25 Years 

25-34 

Years 

35-44 

Years 

45-54 

Years 

55-64 

Years 

65 Years 

and older 

-60% 

Average Income 

Income Growth Rate 

Source: Pre-tax income and growth rates from the BLS “Table 1300. Age of reference person: Annual expenditure means, shares, 

standard errors, and coefficient of variation, Consumer Expenditure Survey, 2013” 


The average income for Americans grows an 

astounding 111% from the under-25 age bracket 

to the 25–34 bracket. After that, income growth 

rate slows to 33% between the 25–34 bracket to 

the 35–44 bracket. Income continues to slow to 

a mere 1% growth rate between the 35–44 age 

bracket and 45–54 bracket, and then hits -6% by 

the time people reach the 55–64 age bracket. So, 

while college students and recent graduates may 

only have an entry-level salary, their earnings are 

also likely to climb dramatically as they become 

full-fledged members of the workforce. That 

makes it more likely that they’ll have the cash 

flow to at least cover their current expenses and 

debt payments—keeping confidence levels high. 

However, as people reach their mid-30s and 40s, 

their salaries begin to stagnate and eventually 

decline by the time they hit their mid-50s and 60s 7 

(likely due to near-retirees leaving their positions 

as they prepare to retire full-time). 


Responsibility 

on the rise 

Household and spending data across age brackets 

from the U.S. Bureau of Labor Statistics provides 

another key factor of the confidence equation. 

Just when average income growth is slowing for 

Americans, financial responsibilities are reaching 

their highest point. 

Average household size by age 

Under 

25 Years 

25-34 

Years 

35-44 

Years 

45-54 

Years 

55-64 

Years 

65 Years 

and older 

2 2.8 3.4 2.7 2.1 1.8 

Average mortgage payment amounts by age 

Under 

25 Years 

25-34 

Years 

35-44 

Years 

45-54 

Years 

55-64 

Years 

65 Years 

and older 

$449 $2,862 $5,078 $3,950 $3,295 $1,560 

Average vehicle payment amounts by age 

Under 

25 Years 

25-34 

Years 

35-44 

Years 

45-54 

Years 

55-64 

Years 

65 Years 

and older 

$2,262 $3,641 $4,010 $3,958 $3,275 $2,133 

Average yearly expenditures by age 

Under 

25 Years 

25-34 

Years 

35-44 

Years 

45-54 

Years 

55-64 

Years 

65 Years 

and older 

$30,373 $48,087 $58,784 $60,524 $55,892 $41,403 

Source: U.S. Bureau of Labor Statistics, “Table 1300. Age of reference person: Annual expenditure 

means, shares, standard errors, and coefficient of variation, Consumer Expenditure Survey, 2013” 


The data shows that average Americans are 

facing their biggest household size, mortgage 

payments, and vehicle payments in their lives 

just as their income growth is peaking, with low 

likelihood of a significant pay increase ahead. 

Revisiting our confidence data with these insights 

in mind, it’s less of a surprise that confidence starts 

plummeting in the mid-30s and 40s demographics. 

We cannot ignore the emotional toll of these 

factors: according to the American Psychological 

Association, the top causes of stress for Americans 

are money, work, and the economy. 8 With a clear 

picture of their current responsibilities, looming 

retirement needs, and tepid outlook for significant 

pay increases, Americans may be facing an 

unpleasant—and stressful—reality check when it 

comes to their financial outlook. 


Financial responsibilities and financial confidence by age 

$90,000 60% 

$75,000 

$60,000 

50% 

$45,000 

$30,000 

40% 

$20,000 

30% 

$10,000 

0 

Under 

25 Years 

25-34 

Years 

35-44 

Years 

45-54 

Years 

55-64 

Years 

65 Years 

and older 

20% 

Spending 

Confidence 

Source: BLS “Table 1300. Age of reference person: Annual expenditure means, shares, standard errors, and coefficient of variation, 

Consumer Expenditure Survey, 2013”Annual expenditure means, shares, standard errors, and coefficient of variation, Consumer 

Expenditure Survey, 2013” 


A detailed look 

by decade 

Under 25: “The young and free” 

Average income: $27,941 

Average percent confident: 39% 

Average annual vehicle payments: $2,262 

Average annual mortgage payments: $449 

Average household size: 2 people 

Average yearly expenditures: $30,373 

Source: U.S. Bureau of Labor Statistics, “Table 1300. Age of reference person: 

Annual expenditure means, shares, standard errors, and coefficient of variation, 

Consumer Expenditure Survey, 2013” 

While earnings tend to be low, those in their 

early twenties also have, on average, the fewest 

financial responsibilities. From a financial planning 

perspective, that makes this an ideal time to start 

building a habit of saving for emergencies and 

retirement—though data reveals that few are. 

Of incoming LearnVest members, this age group 

is the least likely to have an emergency savings 

goal (16.8% of LearnVest members versus 28–30% 

of users in the 25–34 and 35–44 age brackets) 9 . 

Surveys show that only 43% of eligible workers 

under 25 participate in 401(k) plans, compared with 

over 70% of those over 45 years old, and that they 

contribute less of their income to retirement—4.3%, 

versus 8.7% for Americans between 55–64. 10 


Data from the 2012 study for the Certified 

Financial Planner Board of Standards, Inc. and the 

Consumer Federation of America also shows that 

only 35% of people 18–24 have any money saved 

for retirement, far less than the 55% of people in 

the 24–34 age bracket and the 66% of people in 

the 35–44 age bracket. 11 

Just because people under 25 are saving less 

doesn’t mean they haven’t thought about it. The 

same study revealed that nearly 6 in 10 of those 

under 25 think they’re in OK shape or can start 

saving for the future, far more than any other age 

group. 12 

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, when time (and compound 

growth) may be the best asset they have. 


Age 25-34: “The upwardly immobile” 


Income growth rate from previous 

age bracket: 111% 



Average annual mortgage payments: $2,862 

Average household size: 2.8 people 





The false confidence picture comes into sharper 

relief in the next age category, those between 

the ages of 25 and 34. People in this age bracket 

are likely experiencing (or have just experienced) 

the biggest income increase in their lives. And 

their goals, which typically start to revolve around 

lifestyle and building for the future, tend to expand 

with this increase. In fact, according to LearnVest 

data, savings goals for weddings, home buying, 

and “fun” almost double in this age bracket 

compared to those under 25. 

While retirement and emergency savings 

contributions also begin to ramp up at this time, 

they may not be at the same rate that a financial 

planner would advise, given the upcoming 

financial responsibilities, retirement contributions, 

and slowed income growth ahead. 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. It appears that lifestyle spending—not 

savings—inflates with growing income. 


Age 35-44: “The spread thin” 












In this age group, income is still continuing to 

increase, but at a more moderate 33% growth 

rate versus the previous 111%. At the same time, 

average household size is at its highest, vehicle 

payments and yearly expenditures are increasing, 

and mortgage payments are nearly doubling. In 

addition, long-term goals like retirement are now 

competing with other goals, like college funding, 

and income may not be increasing enough to 

accommodate it all. As a result, spending on “fun” 

categories tends to drop back down. It’s hardly a 

surprise then, that as the financial responsibilities 

of adulthood continue to grow, and with little 

chance for a significant pay raises ahead, financial 

confidence declines to its low point here. 


Age 45- 54: “The light at the end of 

the tunnel” 












This age group continues to have low financial 

confidence—right as income increases have 

almost come to a halt, at an average 1% growth 

rate. While expenditures continue to rise slightly, 

the highest jump in savings goals for this group, 

according to LearnVest data, is in retirement 

and cars (perhaps bringing some validity to the 

mid-life crisis car-buying trope). With retirement 

looming, financial responsibilities still at a high 

point, and income growth at standstill, people in 

this age group are likely wondering how they’re 

going to make ends meet. They may need to 

wait another ten years or so (when it’s more 

likely that their mortgage will be paid off and 

their kids have left the house) for their income 

to fall in line with their responsibilities. It’s at 

that point (the 55+ age group) that we finally see 

financial confidence rise again. 


Summary 

and final notes 

Just like overall happiness and well-being, our 

data demonstrates that financial confidence 

follows a U-curve. Those under 25 feel very 

confident before a swift confidence decline 

hits in their 30s and 40s. People appear to 

lose confidence in the face of growing financial 

responsibilities and stagnating income growth. 

The weight of these financial pressures is a 

leading cause of stress nationwide, so perhaps it is 

time to rewrite the confidence story. 

The data shows that in general, young people 

have fewer financial responsibilities and enough 

money to meet their current needs. We posit 

that, therefore, they tend to be more confident. 

As people get older—and perhaps feel like their 

income growth won’t keep pace with their financial 

responsibilities—they tend to be less confident. 

But 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? 

In the aforementioned 2012 study for the Certified 

Financial Planner Board of Standards, Inc. and the 

Consumer Federation of America, researchers 


found that people across age and income levels 

who plan financially feel more confident about 

their financial decision-making, save more money, 

and feel better about their progress to date in 

saving for financial goals. 14 In fact, people who had 

a plan for either emergency savings or retirement 

were nearly twice as likely to feel in control over 

their finances. 15 

If financial confidence is defined as how people 

feel about their money and, more specifically, how 

they feel about their ability to meet their financial 

responsibilities, then we could potentially replace 

the U-curve with a steady line upward by giving 

Americans the power of foresight and planning. 

By knowing what’s ahead and what it may take 

to meet future responsibilities, people can make 

financial decisions today that take both their 

current and future lifestyles into account. 

Perhaps by taking a page from the wellness 

industry, which has made it mainstream for people 

to care about both their current and future health, 

the financial planning industry can do the same. 


Sources: 

1 

Confidence data is as of November 6, 2014, and run on a sample of 

approximately 108k people who visited LearnVest.com. 

2 

Ibid. 

3 

David G. Blanchflower and Andrew J. Oswald, “Well-Being Over Time 

in Britain and the USA,” 1999, http://www.brookings.edu/es/dynamics/ 

seminars/20000127.pdf. 

4 

David G. Blanchflower and Andrew J. Oswald, “Is Well-being U-Shaped 

over the Life Cycle?,” 2008, http://dericbownds.net/uploaded_images/ 

Blancheflower.pdf 

5 

Ibid. 

6 

Jason N. Houle, “A Generation Indebted: Young Adult Debt across Three 

Cohorts,” 2014, http://www.jnhoule.org/storage/Houle2014_GenIndebted_ 

final.pdf 

7 

“Visualizing the 2012 Distribution of Income in the U.S. by Age,” http:// 

politicalcalculations.blogspot.com/2013/01/visualizing-2012-distribution-ofincome.html#.VIniQlfF8hH. 

8 

American Psychological Association, “Stress in America Findings,” 2010, 

https://www.apa.org/news/press/releases/stress/2010/national-report.pdf. 

9 

Data as of May 9, 2014 on a sample of 11,000 users across 20,00 goals. 

10 

Steven Rattner, “Saving Young People From Themselves,” New York Times, 

April 12, 2014, SundayReview, http://www.nytimes.com/2014/04/13/opinion/ 

sunday/saving-young-people-from-themselves.html 

11 

Certified Financial Planner Board of Standards, Inc. and the Consumer 

Federation of America, “2012 Household Financial Planning Survey,” http:// 

www.consumerfed.org/pdfs/Studies.CFA-CFPBoardReport7.23.12.pdf. 

12 

Ibid. 

13 

Data as of May 9, 2014 on a sample of 11,000 users across 20,00 goals. 

14 

Certified Financial Planner Board of Standards, Inc. and the Consumer 

Federation of America, “2012 Household Financial Planning Survey,” http:// 

www.consumerfed.org/pdfs/Studies.CFA-CFPBoardReport7.23.12.pdf. 

15 

Ibid. 

LearnVest Planning Services is a registered investment adviser and subsidiary 

of LearnVest, Inc. that provides financial plans for its clients. Information 

shown is for illustrative purposes only and is not intended as investment 

advice. Please consult a financial adviser for advice specific to your financial 

situation. LearnVest Planning Services and any third-parties listed, discussed, 

identified or otherwise appearing herein are separate and unaffiliated and are 

not responsible for each other’s products, services or policies.

Financial Confidence

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