Financial challenges of young adults around the world: How the U.S. compares to other countries
Despite their geographic diversity, young adults around the world face many of the same financial challenges and have similar life goals.
While young adults around the world enjoy higher education levels than ever before, student loan obligations and high housing costs are impacting the ability for many young workers to save for retirement and build financial security.
In addition, young workers in many countries are faced with high unemployment rates.
These financial pressures are impacting the ability and willingness of young workers to set aside money for retirement, according to a new report by Aegon that studied the experiences of young workers in 15 countries.
For many young workers around the world, paying for basic living expenses is their top financial priority, although many also pointed to enjoying life, taking care of family and buying a house as important financial goals.
Increasingly expensive housing and rent markets in several countries have led to a growing number of young adults continuing to live with their parents well into their 20s, according to the report.
COVID-19 hasn’t helped the situation. According to the study, one in six young adults worldwide have stopped working since the onset of the pandemic.
In addition, many countries are facing the pressure of an aging population driving up old age dependency and putting an increasing strain on younger workers to supplement the retirement income of their retired counterparts.
This is causing some governments to increase retirement ages and revamp pension systems to stave off a crisis.
Several countries are also incentivizing younger workers to save for retirement by introducing auto-enrollment features and providing student loan assistance programs.
Alarmingly, the study revealed low financial literacy among young workers in the countries it studied. The majority of respondents in all countries failed to answer three basic financial questions correctly, according to the survey.
Following are some of the report’s findings from around the world:
Australia After three decades of economic growth, Australia is now struggling with a contracting economy, a lack of job opportunities, and growing unemployment and underemployment among young adults.
As a result, young Australians are cutting back on spending on non-essential items and focusing on necessities.
Canada Many young Canadians reported they are delaying saving for retirement so they can invest in a home instead.
In addition, the survey found young Canadians are embracing technology at a high level, with more than half conducting transactions online at least weekly, and nearly all using social media,
The substantial use of social media is likely to impact where young Canadians gather information and how they make life decisions, the survey said.
China With a rapidly aging workforce, China’s net pension contribution is expected to start declining in 2023 and the program could be wiped out by 2035.
As a result, the Chinese government is debating raising the retirement age beyond 55 for women and 60 for men, and many young Chinese workers expect to need private pensions to fund their retirement income, a marked shift from previous generations that relied almost exclusively on the state pension system.
France French officials have taken a strong position to help young workers economically during the COVID-19 crisis, paying employers more than $4,500 for each person they hire under the age of 26.
The country expects the program to result in 450,000 new hires and 230,000 apprenticeship contracts. The country is also working to build economic security for its growing gig-economy workforce.
Germany A dual-education system in Germany combines subsidized lessons in vocational institutions with on-the job learning with employers, which is a catalyst for lifelong financial stability, according to the report.
As a result, youth unemployment in Germany is among the lowest levels worldwide at 6.8 percent in contrast especially with other European countries that have been grappling with high youth unemployment levels for the past decade.
Poland About 724,000 Polish university graduates live in another country, which has created a high old age dependency ratio of 63 percent.
To try to keep its bright young minds in the country, Poland eliminated income tax in 2019 for many of those under age 26. The country is also trying to retain younger workers by introducing auto-enrollment features across companies of all sizes.
United Kingdom More than half of those between the ages of 22 and 29 in the United Kingdom reported they hadn’t saved any money at all as of 2018.
However, the introduction of auto-enrollment features in 2012 has helped turn the tide, with the proportion of eligible 22 to 29 year olds saving in workplace pension plans increasing from 24 percent in 2012 to 84 percent in 2018.
Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism
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