Understanding the Millennial Mindset for Saving and Investing
Much has been written and studied about millennials — the generation born from the early 1980s until the 2000s, also known as Generation Y — from their political leanings to their obsession with social media, and of course their financial habits.
Millennials came of age amid two major financial crises — the dot-com tech bust of the early 2000s, and more importantly, the 2007-2009 Great Recession. They watched as their parents and grandparents lost significant amounts of wealth. More than that, though, it had a significant impact on their ability to find employment and shaped their attitudes toward investing.
The research on millennials saving habits and attitudes toward investing comes from every corner of the Web. Today we’ll take a look at some of the key facts and statistics for understanding what drivings Millennials spending/saving habits.
- Lifestyle and Values Play a Major Role
According to a millennial money habits survey, their lifestyle choices significantly impact financial decisions. That includes prioritizing experiences over material possessions. Massive amounts of student loan debt and generally low wages also mean that most millennials are focused on short term goals. There is some good news: nearly 70 percent of millennials have savings accounts (even though the majority have less than $5,000 in them).
In addition, research shows that millennials are guided by values and issues such as social responsibility in choosing where to put their money. Three out of every four millennials believe that a company giving back to society in some way, not just turning a profit, is a key issue. Factors such as social responsibility and the environment also play a role in where Millennial consumers place their money.
- Millennials Aren’t as Clueless As You Think
Despite the large numbers of millennials receiving financial support from their parents, and the constant diatribes about the self-absorption of teens and 20-somethings, millennials are actually very aware of their financial situation and concerned about their money. Thier top priority is paying down their debts, particularly student loans. More than half of them have actually set their own financial goals. Many millennials feel that they learned their financial skills from their parents, for better or worse.
- Millennials Are Already Saving for Retirement
More than 70 percent of millennials have already started saving for retirement. And they started saving at a younger age than either of the two previous generations (Generation X and the Baby Boomers): 22 years old, compared to 27 for Gen Xers and 35 for Boomers.
- Millennials Know the Risks of Investing
It’s hardly a surprise, but given that many millennials came of age right in the middle of the financial meltdown of 2007-2009, they are acutely aware of the risks that come with stock portfolios. They are incredibly risk-averse, more so than Gen X (their parents). In fact, their saving habits are more similar to those of Baby Boomers. Millennials prefer to put their money into cash and bonds, instead, with those assets making up 59 percent, compared to 28 percent in stocks. That’s not to say it’s the most sound strategy for them, but it is very much a reaction to what they have already seen.
- Social Media and New Technology Can Help Bridge the Gap
While retirement is a major issue for millennials — most of whom do not expect to receive Social Security benefits — they generally tend to go it alone for investment advice. Those who do invest spend more time reviewing their portfolios than Baby Boomers — on average 7 hours per month compared with 2 hours for Boomers.They tend to trade tips with their peers over social networking and mobile platforms.
In fact, from 2011 to 2014, investors sunk more than $1 billion into tech-focused personal finance companies. Most of them are focused on millennials, including those who haven’t started investing yet.
The truth about millennials and their saving habits is complex. It’s a bit of good news mixed with challenges. However, it’s clear that as Generation Y becomes the dominant force in the marketplace, it will bring with it disruptive technology and new ways of tackling old problems. Concerns like sustainability and corporate responsibility will also have a lasting impact on how companies do business.
