The youngest members of the workforce are demonstrating smart decision-making in areas that will prepare them well for retirement.
Millennials stack up surprisingly well against Gen X-ers and Baby Boomers across several indicators of financial wellness, including debt and savings rates. A new Financial Wellness Insights study, “Financial Wellness Insights: How Millennials Rank on Debt, Savings and Investing” focuses on different themes to help employers and advisors better understand employees and how they can strengthen their financial wellness offerings.
Highlights of the study include:
- Millennials fall behind Gen X-ers and Baby Boomers in liquid savings. Gen X-ers had over 8 times more liquid savings that Millennials, even though Gen X-ers only had 40% more income. The cross-generational trends in liquid savings and income is interesting, especially in light of recent findings that say the typical male U.S. worker earned less in 2014 than in 1973.
- Millennials save an average of $425 per month, which isn’t bad compared to the overall average of $568 per month. Unsurprisingly, savings rates increases with age, with Baby Boomers saving $725 per month.
- A higher percentage of Millennials carry debt across all categories measured – credit card, student loan, and car loan. In dollar amount, Millennials had less debt than the overall average. Gen X-ers had the most debt at $18,690 on average.
- Despite trends that show decreasing rates of homeownership, 38% of all employees list buying a home as a financial goal.
- Millennials have pretty low expectations for their expected retirement income, expecting only $78 per month. In comparison, Gen X-ers expect $379 per month.
Millennials have faced an uphill battle in building up financial security. Many of them entered the workforce during the economic downturn. It has been noted that Millennials are the best-educated generation but make less in real dollars than previous generations.
Much has been said about Millennials’ feelings of entitlement and self-absorption, but our data suggests that they are aware of their financial responsibilities. It’s refreshing to see how they are paying attention to savings and addressing debt.
There’s still a lot of room, and need, for advisors to engage and educate Millennials on how to make the best out of their good intentions. One area that Millennials will need advice around is investing and creating a long-term financial strategy, as 86% of Millennials hold all of their assets in cash.
We’ve found that the key to engaging Millennials is focusing on their financial goals, while providing a visual planning process. With all the concerns about Social Security and the influx of Baby Boomers entering retirement, the youngest members of the workforce have great power to alleviate some of the financial woes that plague us all. Let’s help them.
Matt Iverson is CEO and Founder at Retiremap, based in San Francisco.
