Financial Confidence

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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” 10 Financial Confidence: Examining the U-Curve—and How We Might Improve the Confidence Trajectory
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). 11 Financial Confidence: Examining the U-Curve—and How We Might Improve the Confidence Trajectory
Page 1 and 2: Financial Confidence Examining the
Page 3 and 4: Financial Confidence and the Workpl
Page 5 and 6: Introduction How do people feel abo
Page 7 and 8: Curious about whether income played
Page 9: A closer look at earning power Larg
Page 13 and 14: The data shows that average America
Page 15 and 16: A detailed look by decade Under 25:
Page 17 and 18: Age 25-34: “The upwardly immobile
Page 19 and 20: Age 45- 54: “The light at the end
Page 21 and 22: found that people across age and in

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