Many young whippersnappers need a lesson in financial responsibility. Are you one of them?

Retirement isn't cheap, kids. You're going to need some serious savings by the time you get that gold watch and move to Boca Raton to perfect your golf swing.

Unfortunately, many youngsters these days live like they're never going to retire. Live fast, die young, spend every penny, and buy everything on credit. Something needs to change.

Cold, hard savings facts

A recent survey by Fidelity Investments shows that American workers in their twenties and thirties like to jump from one job to the next, liquidating their 401(k) plans every step of the way, never once thinking about saving enough for retirement. According to the study, 51 percent of these youngsters don't save because "other financial priorities" rank higher on their lists.

They don't even know that they're being bad. About 75 percent of respondents in the Generations X and Y age group said that money worries them more than anything else, and about 60 percent admitted that they weren't making good financial choices. Many would change jobs, never seeking financial advice along the way, and then cash out the old retirement plan because they never knew that there was another choice.

Decisions, decisions

But there are good choices to be made. When you leave your employer, you can simply leave the 401(k) plan untouched until you really need it. You can't contribute any more to that particular account, but it will continue to grow as a tax shelter until you really need the money.

It's also easy to rollover the 401(k) into an IRA account where you can add more money every year and keep managing your investment choices as you please. Or, if your new employer offers another retirement plan, the old one can merge into the new. Cashing it all out is only meant to be an emergency option-not the default or only choice.

Americans and negative savings

The younger generation needs to face up to fiscal reality; but they're not alone. The average American household now owes 30 percent more money than it's saved, and in recent years, the national savings rate has often been negative. That means that Americans are borrowing more than they put away for their futures, something that didn't happen between 1935 and 2005. Now it's almost the norm. The U.S. Bureau of Economic Analysis advocates that people set aside 10 percent of their income for long-term savings. Even a negative 1 percent savings rate is an alarming fall from the heady days of 1985, when people were saving 12 percent of their income.

That declining savings rate is one of the scariest economic trends today, alongside the housing market's bust. With the boomer generation moving into their golden years, young workers will form 60 percent of the work force by 2010. If they can pick up some healthy financial habits, too, it's not too late to reverse this sinking feeling.

Published on September 29, 2008