Enlarge By Alan Poizner for USA TODAY Frank and Erin Lennon, a young couple living in this garage apartment, are working diligently to pay off their debts. Enlarge Kristen Ammerman, 21, is a senior at Michigan State University. In addition to classes she works part-time and knows it will be hard to get a job when she graduates. They're called " Generation Y " — teens and twentysomethings known stereotypically for their coddled upbringing, confidence, opinionated dialogue, free-spending habits and openness to change. Ultimately, however, the more than 50 million members may be best remembered for whether they can overcome the dire financial straits that plague many of them. Even before the recession, those in Generation Y — the latest products of a get-it-now, pay-for-it-later mind-set that has permeated the nation's economy — faced a range of financial pitfalls as they embraced expensive high-tech gadgets and added credit card debt onto student loans. Now, stagnant wages, job insecurity, the decline in employer-sponsored health insurance and retirement benefits, the rapid increase in basic expenses, soaring debt and minimal savings have jeopardized the economic security of the entire generation, according to a recent report by Demos, a public policy research and advocacy think tank. STUDY: Millennial generation more educated, less employed RECESSION GENERATION? Bracing for a simpler lifestyle HEALTH REFORM: 2 million eager to get on parents' plans Their generation is the first in a century that is unlikely to end up better off financially than their parents, the Demos report said. "The recession has hit them hard," says Jose Garcia, associate director of policy and research at Demos, based in New York. "It affects their income potential, their saving potential and their career-ladder potential." Kristen Ammerman, 21, a senior at Michigan State University, faces such challenges and sees her Gen Y classmates struggling with financial issues — while seemingly oblivious to the potential consequences. "I work at a part-time job, have incredible debt and get food stamps," she says. "I'm still short on rent every month. ... My friends all want the newest and best things. They spend money on them any chance they get." No standard definition for Generation Y exists, but analysts generally classify anyone born from the 1980s to 2000 as members. Demographers also call them the Millennial Generation. Their plight seems as much created by members' pre-recession personal finance habits as by the misfortune of coming of age as the recession took hold in December 2007: •About 37% of 18- to 29-year-olds have been underemployed or out of work during the recession, the highest share among the age group in more than three decades, according to a Pew Research Center study released in February. •This generation is the least likely of any to be covered by health insurance. Just 61% say they were covered by some form of a health plan, the Pew study said. •Only 58% pay monthly bills on time, a National Foundation for Credit Counseling (NFCC) 2010 survey said. •60% of workers 20 to 29 years old cashed out their 401(k) retirement plans — typically a big financial no-no because such a move squanders retirement assets and forces the recipient to pay a tax penalty — when they changed or lost jobs, an October study by Hewitt Associates said. •Nearly 70% of Gen Y members are not building up a cash cushion, and 43% are amassing too much credit card debt, says a November MetLife poll. On average, Gen Yers each have more than three credit cards, and 20% carry a balance of more than $10,000, according to Fidelity Investments. •Millennials are graduating from college with an average of $23,200 in student debt, according to the most recent data from the Project on Student Debt. That is a 24% increase from 2004. "They have high, unrealistic expectations," says Lee Jenkins, author of Lee Jenkins on Money and a managing partner of Atlanta Capital Group in Atlanta. "And many of them don't manage money very well." 'A pretty optimistic outlook' Even so, not all Gen Y members have learned from the harsh realities they face. This year, 25% of Gen Y members say they are spending more than last year, compared with 18% of all adults, according to the NFCC survey. "They are throwing caution to the wind and have a pretty optimistic outlook," says Gail Cunningham, vice president of NFCC. Unemployment among Gen Y members is "badly setting back their careers," says Paul Taylor, executive vice president of the Pew Research Center. "Yet, despite the problems they face, they tend to be upbeat — which is typical of young adults." That doesn't necessarily mean that Millennials are confident in their ability to manage their finances in a way that allows them to emerge from their predicament. "Many of them are willing to buy now and pay later," says Ashley Adami, a financial planner for ClearPoint Credit Counseling Solutions in Seattle. She not only has Gen Y clients, she is a Gen Y member. A common trait within members of the generation is a belief that they have the skills and ability to make money and afford large purchases, even when it doesn't appear that they do. Frank Lennon, 27, an analyst in the hospitality industry in Nashville, acknowledges that during his college years and after graduation, he spent more money than he made. "I was greedy," he says. "I made a lot of poor financial decisions without thinking of the big picture. I should have known better." Lennon's wife, Erin, 26, is still in college and has $28,000 in student loans. It was only when they were married in October that they became aware of their total credit card and college loan debts. "The real shock was on our wedding day, when we realized that we were $104,000 in debt," Frank says. "Because we had gotten some cash gifts, we used it to make a credit card payment on our wedding night." Turning around the turmoil The keys to turning around financial turmoil traditionally have been employment and earnings. But Millennials have become known for switching jobs constantly, says Brad Kimler, executive vice president of Fidelity's Consulting Services business. And unfortunately, when they have left jobs, they often have cashed out their retirement plans, saying they needed the money, he says. Ammerman, who works part time at Home Depot, has job-hopped since she started working in high school. "I switch around because I get bored or need to make more money," she says. She says she does not participate in Home Depot's 401(k) plan because she has too many bills to pay. The recession and its fewer job opportunities have grounded some Millennials. Stefanie Potts, 24, an assistant director at the University of Southern California's Office of Admission, says many in her generation initially thought it was desirable to move around, take job risks and get experience. "The advice has completely changed," she says. "Most of us are happy to have a job." But many who are just graduating from college are having trouble starting out with an entry-level job in their field. Some can find only unpaid internships. And because entry-level jobs generally offer low pay, graduates who are overwhelmed with debt may have to seek better-paying, non-professional jobs. "I was helped by my parents," says Mark McShane, 27, who works for a financial services company in Boston. "Even when I graduated, they gave me a small stipend to help me with those first 15 months out of school. But without that, I'm not sure I would have been able to accept my initial job, which leads to the next step in my career." Even before the recession, nearly half of college students dropped out before earning a degree, the Demos report said. Now, people from low- and moderate-income families are much less likely to enroll at all. 'A dose of reality' The unemployment rate for Gen Y remains much higher than the national rate. In March, the national rate was 9.7%, compared with 18.8% for workers younger than 25, according to the Bureau of Labor Statistics. "The economy has given them a dose of reality," Jenkins says. More than half of Generation Y, 60%, say they are concerned about paying their bills, according to a recent poll by Harvard's Institute of Politics. "When you get a little bit of money, what do you do with it?" asks Mikala Shremshock, 27, who works for Veeco Instruments near Philadelphia. "Do you pay off your credit cards, put it toward student loans, make an extra payment on your house or car, or put it in your IRA? I don't have enough to really make a big dent in anything. If you get a bonus, why not just spend it?" Faced with financial setbacks, Millennials are starting to be more realistic. More than half of them, 55%, say they are watching their spending very closely now, up from 43% in 2006, according to the Pew Research Center. It's unclear whether the more-conservative approach to personal finance is only temporary, Fidelity's Kimler says. Frank and Erin Lennon say they are living frugally now. They rarely eat out. Frank temporarily has stopped making contributions to his 401(k) plan so they can focus on paying down debt. "I think the reason why we're being so frugal now is because we've seen the rainy days, and we've had friends that have gone through some really hard times," he says. The couple have a dry-erase "Bill Board" on their refrigerator, where they keep track of their debt. "This allows us to remain on the same page and resist unnecessary spending," Frank says. Unlike their parents, who had the G.I. Bill and pension plans, those in Generation Y have few safety nets. Ammerman is not worried about her future, even though she will graduate with a journalism degree at a time when newspapers are closing and jobs are hard to get. Rather than trying the newspaper route, she is thinking of trying to use her skills to write about video games, a field she says is male-dominated. "I know what I'm capable of, and I know where I can go, so I can do the best," she says. Guidelines: You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. Read more