While Millennials do appear to be on their way to being in better financial shape than other generations, they still carry with them a number of bad financial habits, according to a recent study.
Allianz’s Generations Ahead study finds that social media has become the Millennials’ “financial Achilles’ heel,” as more than half of respondents (55%) report that they have experienced a fear of missing out (FOMO) and 57% participated in impulse purchases because of what they saw on their social media feeds.
An overwhelming majority (88%) of Millennial respondents also believe social media fosters an environment of comparing one’s wealth and lifestyle with others', compared to 71% of Gen Xers and 54% of Boomers. Moreover, 61% of Millennials report that they feel insufficient about what they have because of social media and half of respondents claim they spend more on going out than they do on rent or mortgage.
“Millennials are finding innovative ways to build their financial strength and are becoming more confident because of these actions. But, more than any other generation, social media and the allure to spend beyond their means could have long-term negative effects on their finances if they’re not careful,” explains Paul Kelash, vice president of Consumer Insights for Allianz Life.
Risk Averse
Millennials’ financial behaviors have also been influenced by their parents' financial traumas, but not necessarily in a good way.
Nearly a quarter (24%) of Millennials witnessed their parents undergo a major financial setback during the 2008-2009 recession and, perhaps because of this, 57% said they are unlikely to ever invest in the stock market. On a positive note, however, 65% say they are “uncomfortable with too much debt” because they watched their parents struggle with it.
“While it’s promising that many Millennials are working to avoid debt and build savings, seeing such a large number of them averse to investing is a concern,” observes Kelash. “A balanced approach to saving and investing is a strong recipe for a solid retirement and if they have worries, a financial professional can help them find the right balance.”
To that end, the study also found that Millennials are the most open of the generations to working with a financial professional. In fact, 40% of Millennials said they have a financial professional and work closely with them, compared to only 25% of Gen Xers.
And while, not surprisingly, the vast majority (70%) use online apps or other tools to help manage their money, human interaction remains very valuable to them. The study found that 42% of Millennials ranked communicating in person with a financial professional as their first choice of communications, with phone communication coming in second at 19%, followed by online communications at 16%.
Despite the negative findings about social media habits, the study did reveal positive findings about Millennials' savings habits. Among the key findings are that 77% of Millennials feel financially confident, compared to only 64% of Gen Xers. In addition, 48% of those with a 401(k) say they contribute 10% or more on a monthly basis — higher than the 36% of Gen Xers and 44% of Boomers who reported the same.
Moreover, 41% of Millennials reported they always set aside money each month for saving, compared to 36% of Gen Xers, and 58% believe saving for retirement is a basic necessity, like food or housing. A strong majority of Millennials (71%) also report that they use “tricks” to make saving easier, such as using several different accounts to automatically save their money for specific purposes.
The study was conducted for Allianz by Larson Research + Strategy via an online survey in May 2017 with 3,006 U.S. adults ages 20-70 with a minimum household income of $30,000.
