Financial Independence Survey COVID-19 impact on Young Americans’ path to financial independence

May 2020

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2 Financial Independence Survey Half of Young Americans view themselves as financially independent today While there has been little fluctuation in the number of Young Americans who classify themselves as financially Independent since earlier in 2020, many are concerned about an uncertain future

+ 1% from 57% Feb/March 2020 74% Can meet financial obligations without “I am anxious about how help from parents, grandparents or coronavirus will impact my others finances.”

No Completely

-2% from 52% Feb/March 2020 63% (+10% from Americans overall) Partially Can meet financial obligations without Are concerned that they may lose their help from cards, student , or job due to the coronavirus outbreak personal loans

Source: The Harris Poll on behalf of TD Ameritrade (February, n=2,0002 and April, n=691), Harris Poll (April, n=980) 3 Financial Independence Survey Even before Covid-19, many Young Americans relied on their parents to chip in for all or some of their Two-thirds admit, “I don't know how people my age survive without extra financial support from family” (62%), while 1 in 4 still rely on their parents to cover their entire rent check

Do your parents pay for all / part / none of the following? Total All Part (All / Part) Parental support is no secret Cell phone 40% 18% 58%

Insurance 35% 17% 52%

Medical expenses 34% 18% 52% 83% “I'm grateful for the financial Streaming subscriptions 32% 17% 49% support my parents have offered me as I exited school Vacation / travel 26% 21% 47% and entered the workforce.”

Car / transportation 24% 22% 46% Rent 25% 15% 40% 71% 32% Down payment on house 22% 10% “I'm open with my friends about the parental support I

Credit cards 18% 12% 30% receive or how I afford my lifestyle.” Student loans 12% 15% 27%

Fitness 13% 9% 20%

Source: The Harris Poll on behalf of TD Ameritrade (February-March); All respondents (n=2,002) 4 Financial Independence Survey Nine in 10 “want to be financially independent” – and their parents feel the same Yet Young Millennials in particular feel that the odds are against them, crippled by rising living costs and student

Young Americans crave independence… … But are constrained by expenses and debt

“My generation is having a tougher “I don't want to rely on time achieving financial independence, 85% my parents financially.” 82% because the cost of living has gone up and levels remain the same.” 82% Young Millennials | 87% Gen Zs 86% Young Millennials | 79% Gen Zs

“My parents want me to be “I'm in so much debt, it feels like I'm never going to be 85% financially independent.” 37% financially independent.” 89% Young Millennials | 83% Gen Zs 42% Young Millennials | 34% Gen Zs

Source: The Harris Poll on behalf of TD Ameritrade (February-March); All respondents (n=2,002) 5 Financial Independence Survey Yet Covid-19 has created a new set of obstacles for Young Americans Most are not sure how their generation can navigate through these changes, while six in 10 go so far as to say the pandemic has “derailed their journey to financial independence”

71% 61% 59% “I am worried about my “I was already stressed out “Covid-19 derailed my generation’s ability to survive by my finances, it's hard to journey to financial this financial downturn, without imagine my financial future independence.” governmental support.” now.” 69% 48% 46% “I'm expecting to delay some of Put their plans for starting a Have or plan to move my life milestones due to family on hold as a result of back in with their parents COVID-19.” the recent economic downturn. as a result of the recent economic downturn.

Source: The Harris Poll on behalf of TD Ameritrade (April); All respondents (n=691) 6 Financial Independence Survey While some Young Americans are shifting strategies due to recent events, the majority remain committed to plans

Have you done any of the following as a result of the recent economic downturn?

I w on’t do this 24% 34% 51% 55% 52% 56% 55% 63% 65% 61% 62% 63% 61% 64% Plan to do this 36% but haven’t 31%

15% 21% 25% 23% 18% 21% 21% 30% Have already 17% 21% 24% 21% done this 40% 35% 31% 27% 24% 20% 19% 18% 18% 17% 16% 15% 15% 14%

Put more Started a Moved back Put my Bought Shifted Stopped Moved in w Stopped Sold Stopped my Adjust Sold Adjust money into side hustle / in w parents plans investments paying another investing in investments 401(k) / IRA retirement investments retirement savings sought new for starting a to less risky student family the to re-invest contributions plan time to cash out plan income family on vehicles loans member market them horizon investments streams hold

Source: The Harris Poll on behalf of TD Ameritrade (April); All respondents (n=691) 7 Financial Independence Survey Those who do achieve financial independence are self-motivated Two-thirds are forging their own financial paths saying, “I'm working to unlearn the financial lessons of my parents, as I seek financial independence” (63% FI vs. only 55% non-FI)

My choice to become financially independent was primarily… Financially Independent Young Americans embrace Self-driven Driven by others an accelerated timeline

Age at which became / expect to Young become financially independent 72% 28% Millennials 20 25 Financially Not Financially Independent Independent Gen Zs 66% 34% Age at which it’s embarrassing to receive financial support from parent(s)

Parental guardrails guide path to FI: 50% of Financially Independent Young Americans say their parents told them they were on their own or established clear boundaries about when 27 29 Financially Not Financially

they would be financially cut off, compared to only 31% non-FI. Independent Independent

Source: The Harris Poll on behalf of TD Ameritrade (February-March); All respondents (n=2,002) 8 Financial Independence Survey Financially Independent Young Americans are also focused and strategic Financial preparedness is the primary differentiator between those who achieve independence and those who do not

“I think about my “I feel prepared “I consider financial commitments to handle my own myself to be an all the time.” finances.” overachiever.”

Financially Financially Financially 77% Independent 73% Independent 68% Independent

Not Financially Not Financially Not Financially 64% Independent 45% Independent 57% Independent

Overachievement 70% of Financially Independent Young Americans say, “In today's competitive can lead to burnout climate, burnout is a natural part of achieving success,” compared to 63% non-FI.

Source: The Harris Poll on behalf of TD Ameritrade (February-March); All respondents (n=2,002) 9 Financial Independence Survey The Financially Independent are more likely to make sacrifices early to get ahead The vast majority say financial independence is driven by hard work (77%), as opposed to being driven by good luck (23%)

Have you done any of the following? Financially Independent Young Americans Not Financially Independent Young Americans

Worked during college 47% 28%

Worked over the summer while in school 47% 39%

Lived at home during college 32% 27%

Lived at home after college 28% 16%

Financial Independence Graduated college in 4 years or less 24% 7% is more driven by…

Taken a course in high school/college 22% 18% 77% 23% Hard work / Luck Took a gap year before college 17% 10%

Source: The Harris Poll on behalf of TD Ameritrade (February-March); All respondents (n=2,002) 10 Financial Independence Survey Their top advice for achieving financial independence is staying on Many are also turning to side hustles and investing to increase their net worth at an early age

Which of the following do you believe is most important to achieving financial independence? (Financially Independent Young Americans)

1 Having a strict budget 63% 2 Decreasing living expenses 51% 84% Financially Independent 3 Increasing income with side hustles 41% Young Americans 4 Investing in the stock market 24% “Reducing living expenses is a key component of Maxing out tax-free income wherever possible 20% becoming financially 5 independent.” 6 Investing in real estate 20%

Source: The Harris Poll on behalf of TD Ameritrade (February-March); Financially Independent Young Americans (n=1,215) 11 Financial Independence Survey As a result, the Financially Independent spend less on discretionary expenses They are also looking to build nest eggs, with 74% of Financially Independent Young Americans saying they “increase their savings rate when they get a raise”

Approximately what percentage of your after-tax income goes towards the following? (Mean summary)

Cars and Esse ntia l HH Savings and Disc. Student Other non- Housing transportation expenses investments expenses debt mortgage debt Other

Financially 21% 15% 14% 11% 8% 6% 6% 21% Independent

Not Financially Independent 12% 17% 15% 14% 13% 7% 5% 18%

Financial independence can drive relocation: While 64% of non-Financially Independent Young Americans say they would consider moving to a less expensive city or state to become financially independent, those who have achieved FI are more likely to say they have actually done so (23%, compared to only 13% non-FI).

Source: The Harris Poll on behalf of TD Ameritrade (February-March); All respondents (n=2,002) 12 Financial Independence Survey But sticking to a budget doesn’t necessarily mean living like you’re broke Financially Independent Young Americans are more in control of their finances and mindful about splurging when it makes sense for them

I often live… The art of the Like I’m broke Above my means strategic splurge

% who have treated themselves (e.g., an expensive gift, trip, etc.) Financially 57% 43% Independent 55% 42% Financially Not Financially Independent Independent

Not Financially 65% 35% Independent % who have paid to outsource tasks so they can focus on what’s important

Non-FI more likely to avoid lifestyle upgrades: 70% of non-FI Young Americans say, “I will continue or have 25% 13% continued living like a college student so I can save more,” Financially Not Financially compared to only 61% FI. Independent Independent

Source: The Harris Poll on behalf of TD Ameritrade (February-March); All respondents (n=2,002) 13 Financial Independence Survey The Financially Independent also prioritize retirement savings and real estate While non-FI Young Americans are less likely to take advantage of retirement savings vehicles and more likely to opt out of saving and investing all together

Does your investment portfolio include any of the following?

Financially Independent Young Americans Not Financially Independent Young Americans

34% 33%

25% 25% 24% 23% 21% 20% 18% 17% 17% 17% 15% 13% 13% 12% 11% 10% 9% 8% 6% 6% 4% 4%

Company- Solo/ Roth Emergency Other savings Brokerage Real Trusts Traditional IRA Annuities SEP None of sponsored Individual IRA fund accounts accounts estate IRA these 401(k) 401(k)

Source: The Harris Poll on behalf of TD Ameritrade (February-March); All respondents (n=2,002) 14 Financial Independence Survey For example, the Financially Independent are more likely to invest in a home Meanwhile, Young Americans who are not Financially Independent are much more likely to live at home with their parents rent-free

Which of the following best describes your living situation?

Financially Not Financially Financially Independent Independent Independent are more likely to live solo

Own my own place 28% 5% Financially Independent Young Americans who are paying their own rent are more likely to live alone (45%, compared to 31% non-FI). Rent my own place 37% 14% Those who do have roommates are likely to have 1, while non-FI Young Americans say Live in a place my parents pay for 6% 12% they have a median of 2.

Among those with roommates, most live with Live with my parents / family rent-free 21% 60% roommates they know well (54%), followed by a significant other (39%), and roommates they don’t know well (8%). Live with parents and pay rent 8% 9%

Source: The Harris Poll on behalf of TD Ameritrade (February-March); All respondents (n=2,002) 15