Will Echo Boomers Save the Economy? Don't Count on It

Some economists are predicting that Echo Boomers -- people born between 1980 and 1995 -- will save America's long-term economic future from disaster.

Sure, the group is slightly larger than Boomer generation the gave birth to it (80 million compared to 77 million Baby Boomers). And they're better educated, optimistic about their future, and still have their peak earning years ahead of them.

But is their future really that bright? Not as things currently stand.

Dismal Balance Sheets

In fact, Echo Boomers are starting off in a horrible position to achieve comfortable financial lives -- let alone to saving the U.S. economy.

The average Echo Boomer has $34,765 in debt, according to credit reporting agency Experian. And the largest portion of that isn't even secured debt -- debt backed by a physical asset (home mortgages or car loans, for example) that can be sold to repay the loan. The bulk of their debt is in student loans. The average college senior now graduates over $25,000 in the red.

The other side of the Echo Boomer balance sheet is equally dismal.

The average Echo Boomer has just $3,208 in savings. What's worse, those savings are largely concentrated in low-yield investments like bonds, money market accounts, and cash because these youngsters are nervous about taking financial risks.

Yet while their net worth lingers in the red, Echo Boomers are the most "plugged in" generation (97 percent own a computer and 94 percent own a cell phone), according to a 2007 study, indicating perhaps that what disposable income they do have is spent on technology that keeps them connected.

Finances Drive Behavior

The poor state of Echo Boomers' finances has also led to some behavioral shifts that could have additional unanticipated negative effects on the economy as well.

As a group, Echo Boomers are getting married at an older age -- a move which has brought clear benefits: Women who have college degrees and wait until their 30s to get married have higher incomes than their peers who marry younger. It has also brought down the divorce rate.

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But according to a recent study titled "Knot Yet," published by the National Marriage Project at the University of Virginia, as the age of marriage has risen, the age at which women are having their first child has dropped.

This shift -- which the researchers call "the Great Crossover" -- has had a disastrous effect upon those mothers, a group that accounts for about two-thirds of women in this age group. Most of them have high school degrees or just some college. According to the study, they are left "providing for and raising young children, often without a husband" -- a scenario which has "long been associated primarily with more disadvantaged women."

It's an outcome that has obvious effects on their children. According to the study, "children of unmarried mothers have poorer outcomes than children growing up with their married parents" -- academically, emotionally, psychologically, and, eventually, economically. As a result, this Great Crossover is creating a "negative economic and cultural feedback loop," which ultimately results in educational inequality, as well as family and economic instability.

Still, while the Echo Boomers' near-term future isn't bright, it could be improved with some behavioral changes.

If they become determined to pay down their debt, save and invest their excess income, and start delaying having children until they are married, they could very well save America's long-term economic future.

This article was written by Motley Fool analyst Adam J. Wiederman. Click here to read Adam's report detailing one tactic that can boost your Social Security payment by as much as 76%.

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