By: Jilian Mincer, Dow Jones Newswires

September 26, 2005, Wall Street Journal

They are ambitious, autonomous and optimistic.

They like to shop, volunteer and instant-message. They expect to work hard, get rich and help others.

They are Generation Y. Born between 1977 and 1997, the more than 70 million members of Gen Y already outnumber their baby-boomer parents.

Also known as "echo boomers," the oldest of the group have entered the work force. While many banks and credit-card companies are tapping this market, Gen Y is barely on the radar screen of most investment firms.

One of the biggest hurdles will be persuading Gen Y to stop spending and to start saving. Thanks to part-time jobs and generous parents and grandparents, this group shops a lot. In the first quarter of this year, they were the largest consumer of goods and services in the U.S.

"We think that approaching college students and new entrants into the work force is very important for investment firms, primarily because they're untargeted," said Matthew Josefowicz, author of a study in 2003 by Celent, a Boston consulting firm, called "Gen-Y College Students, Financial Services, and the Web."

The good news is that 94% of Gen Y adults surveyed for a report released in August by Diversified Investment Advisors said "it is important to save."

The group already anticipates having to fund their own retirement. Sixty-two percent don't think Social Security will be around when they retire. More than a third of them expect to start saving for retirement before they are 25, and 70% of those eligible contribute to their 401(k) plan. But 75% would rather take $10,000 today than wait three years for $15,000.

In recent years, banks and credit-card companies have marketed heavily to this group, especially when starting college or a new job. "College and college graduation provide opportunities to target people because it involves relocation," Mr. Josefowicz said.

But don't expect the Gen Y generation to wait in line to cash a check. Services need to be available online and easy to use for these nanosecond consumers.

"If I were banks and investment firms, I would market to the parents for the kids," said Rich Honack, an associate professor of marketing at the Kellogg School of Management at Northwestern University. "They need to teach them the value of money."

Mr. Honack worries that if Gen Y doesn't learn a little budgeting, many of them will have substantial credit-card debt by age 25. Getting parents involved is good for another reason. More than 65% of the respondents to the Celent survey ranked parental recommendations as "very important" or "important" in choosing a provider.

Some investment firms are taking notice of Gen Y by offering easily accessible information and retirement plans on the Internet.

T. Rowe Price Group Inc., for instance, has launched an Internet tool for new parents.

"We find a large majority of our college-savings accounts are opening in the child's first year of life," said Brian L. Habas, marketing manager for college savings plans at T. Rowe Price. "I think we're seeing a lot of young parents getting started, and unlike their parents, they know the onus is on them."