Who says that millennials can't manage their money? To a certain extent, millennials do – even though the evidence suggests otherwise.
Bank of America recently released the Winter 2018 edition of their Better Money Habits Millennial report, breaking the millennial stereotype of the irresponsible, self-absorbed generation sponging off their parents and holding unrealistic expectations. The report shows a generation with an eye toward financial planning and the focus to execute their plan, while struggling with self-doubt.
According to the report, millennials show comparable or superior savings habits to Baby Boomers or members of Generation X. 57% of millennials have a savings goal, compared to 42% of the other two generations. Just under half (47%) of millennials have accumulated at least $15,000 in savings, and 16% have $100,000 or more in savings – well on their way to sizable nest eggs.
Two-thirds of the millennials who have savings goals stick to those goals most or all of the time. Similarly, 54% of millennials have a budget and 73% of those stick to their budget most or all of the time.
Family plays a key role in their financial decisions. Approximately 30% of millennials with children said finances were a major consideration in starting a family, and 27% of millennials are putting aside funds for their children's education.
Close to half (46%) of millennials have asked for a raise at work – a higher percentage than other generations – and 80% of those who asked received a raise.
These statistics portray a relatively confident generation when it comes to finances, but other results from the report suggest that millennials are buying into some negative stereotypes. Three-quarters of millennial respondents think that their generation overspends compared to others, 73% believe that millennials spend too much on unnecessary indulgences, and 64% believe that their generation does not manage money well.
Perhaps this is a product of high expectations. Millennials came of age during the Great Recession and entered a difficult job market with disproportionate levels of debt. They witnessed what happens to those who are careless with their money, and may be holding a higher standard as a defense against future recessions.
With high expectations comes higher stress. When asked about their top financial stressors, 35% of millennials cited the feeling of not saving enough money – the top stressor on the list. However, the report unearthed plenty of other financial stressors, including insufficient retirement saving/planning (21%), health costs (19%), student loans (17%), credit card debt (17%), and not being able to afford a home (20%).
Stereotypes may be reinforced by the realities of today's job market and costs of living. For example, some millennials are saving money by staying with their parents in the early working years, allowing them to put aside large percentages of their salaries. Distant observers may look at that as taking advantage of parents, when in fact it's a sound savings strategy – and we suspect that many parents enjoy having their kids for a bit longer.
Similarly, millennials tend to switch jobs more often and expect to do so in the future. That's not irresponsibility – that's an acknowledgement of changing trends and the new gig-economy. The days of forty years and a pension are long gone, and at least millennials realize that they are not coming back.
In essence, the Bank of America report says, "Millennials, you're doing a great job. Stay fiscally responsible, keep learning, and don't listen to anyone who tells you otherwise." We agree. Ignore the stereotypes and hang on to those high financial standards. They'll serve you well in the end.
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