Millennials are often labeled as being financially irresponsible, spending too much on frivolous things or experiences, but they are actually positioning themselves to be in better financial shape than other generations, according to the Generations Ahead Study from Allianz. The study found that 77% of millennials feel financially confident (compared to only 64% of Gen Xers).
Further supporting this financial progress, 41% of millennials reported they always set aside money each month for saving (compared to only 36% of Gen Xers) and 58% believe saving for retirement is a basic necessity, like food or housing. Many millennials (71%) also use “tricks” to make saving money easier. For example, the majority of them use several different accounts to automatically save their money for specific purposes (one for everyday expenses, one for a particular loan, one for a special trip, etc.).
Social media dangers
As their financial strength builds, however, social media has become the millennials’ financial Achilles’ heel. More than half (55%) reported experiencing a fear of missing out (FOMO) and 57% spent money they hadn’t planned to because of what they saw on their social media feeds. The vast majority (88%) of millennial respondents also believe social media creates more of a tendency to compare one’s wealth/lifestyle with others (versus 71% of Gen Xers and 54% of boomers). Sixty-one percent feel inadequate about their own life and what they have because of social media. And perhaps due to this FOMO, half also claim they spend more money going out than they do on rent or mortgage.
Learning from the past, seeking help for the future
Recent financial traumas witnessed by millennials have also had a profound effect. Nearly a quarter (24%) of millennials saw their parents suffer a major financial setback during the recession of 2008-2009 and possibly because of this, 57% said they are unlikely to ever invest in the stock market. Additionally, 65% are uncomfortable with too much debt because they saw their parents struggle with it.
The study also found that this generation is the most open to getting help. While the vast majority of millennials (70%) use online apps or tools to help them manage their money, human support is still very valuable to them. In fact, 40% of millennials said they have a financial professional and work closely with them (compared to only 25% of Gen Xers).They also prefer to communicate in person with a financial professional (42% ranked it as their first choice with phone communication coming in second at 19%). Many millennials believe having a financial professional would give them some relief from the pressure of trying to plan for their family’s future, as 70% are overwhelmed by the thought of how they could provide for themselves and their family in the long term.