Total Benefits | Published in June 2017

A Heavy Load

Understanding Millennials' competing financial priorities

By Rebecca Moore | June 2017
Art by David McMillan

“Millennials get all the press, probably because they are the digital generation,” says Monika Hubbard, a Louisville, Kentucky-based institutional retirement consultant at Unified Trust Co., and an Accredited Investment Fiduciary (AIF). “In addition, the wealth transfer from Baby Boomers will be mostly to Millennials—about $30 trillion—and interest follows money.”
These Americans, ranging from roughly the late teens through mid-30s, may not be getting the guidance they need when it comes to their retirement plan and overall financial wellness—something that may be increasingly important as they age.
According to Hubbard, 60% of Millennials’ say their top worry is having too little money for their short-term financial­ needs.
Larisa Terkeltaub, senior director of LearnVest at Work, in New York City, says this generation faces countless competing priorities as they transition into adulthood and embark on traditional milestones. From starting out on their own and needing to create a budget, to saving for a house, to paying off debt and putting money toward a child’s education, there are many financial priorities for these young adults to balance. In addition, they need to start saving, or to save more, for retirement. The cumulative effect can seem overwhelming.
“On top of these priorities, this generation faces the enormous student loan crisis, which can make it tough to create breathing room in their budget to free up dollars for their long-term goals. Studies have shown that carrying student loan debt may even cause people to delay major life decisions,” Terkeltaub says.
Meghan Murphy, director of thought leadership at Fidelity in Boston, observes that 42% of Millennials have little or nothing­ saved for an emergency. “Emergency savings is something on which plan sponsors can focus,” she says. “If individuals don’t have that, credit card debt increases, they are less likely to save, and financial confidence decreases.”
Competing Priorities
Current research studies reflect Millennials’ competing priorities—conflicting findings being typical as to what really drives this group’s financial actions.
One practice that could keep them from financial success is a preference to save cash for a rainy day rather than invest for the future, says the “Bank of the West 2017 Millennial Study.” Having come of age during the Great Recession, Millennials gravitate toward low-risk strategies, with most (76%) saving cash in checking or savings accounts. They also prioritize saving for more aspirational goals—e.g., travel, education or buying a home—over paying down debt and saving for retirement, Terkeltaub says.
With that said, she continues, LearnVest has found Millennials’ top financial goal is budgeting. “This group is looking for actionable solutions and views budgeting as a tool to not only avoid taking on additional debt but also to free up dollars for savings,” she says.
Hubbard says Unified Trust has observed interest in topics correlated to stress. “They ask questions such as ‘How do I manage money—that is, reduce credit card debt and improve my credit score while managing day-to-day expenses?’
“We always tell them to save early and save more,” she says, “but if the average debt for student loans is $10,000 to $15,000, and they have to pay for living expenses, they think, ‘How can I save enough to get the company match when I don’t have money for current expenses?’” She adds that Millennials, unlike the Baby Boom generation, worry more about breaks in service—reducing their hours worked over a year, making them ineligible for benefits—or a change in jobs.
How Plan Sponsors Can Help
“If you have spread resources across too many buckets, it can feel like you’re not making progress on anything. So, a big part of this process is to strike the right balance between working toward the goals that feel most pressing and building a solid financial foundation,” Terkeltaub says.
Hubbard says any retirement plan sponsor should understand generational concerns but also individual concerns: “Maybe a 25-year-old doesn’t have student loan debt. Younger Gen[eration] Xers have children; older Gen Xers have children going to college, and sometimes they also face taking care of their parents.”
The Bank of the West study found that Millennials are more likely than older generations to say that budgeting tips and free financial education would most help them. A MassMutual Life Insurance Co. study reinforces that: Millennials were almost twice as likely as the general population to rely on their employer’s educational programs and resources when investing and allocating their retirement savings.
Providing access to a one-on-one financial planner who can create a customized plan for employees can help them gain confidence in their financial well-being, Terkeltaub suggests. Further, a dedicated financial planner can help employees take advantage of benefits their employer already offers.
Broader financial wellness education can also help. Hubbard suggests plan sponsors should explore different programs available in the marketplace. “Look to outside vendor support, because when you start talking about very personal things, employees don’t want to [discuss them with] someone in the company; they need to feel they can trust and share personal information,” she says.
Plan sponsors lacking such resources, and those that have them but could use additional support, need to ensure their provider is engaged at the participant level, Hubbard says. Providers can offer tools and thought leadership to help employees reach retirement success—tools encouraging retirement saving and addressing challenges that impede it.
Plan sponsors can also think about the ways in which they communicate to plan participants. According to Corporate Insight, plans can boost interactions with Millennials as much as 50% by using social media vs. relying on call centers and in-person interactions.
“When employees understand the basics of financial planning and how to improve their finances from the core level, they can work to establish a solid foundation to continuously build upon,” Terkeltaub says.

Key Points

  • Millennials have competing financial priorities, and retirement does not top the list.
  • Budgeting is the first financial goal for Millennials.
  • Plan sponsors can make a difference for Millennials by offering broad-based education in personal finance.

Financial Wellness Topics Offered by Employers

Offers currently
Likely to add to offerings
of financial
Saving for
life stages
Health care
Source: Aon Hewitt, “2015 Hot Topics in Retirement”