Affluent Millennials are prioritizing enjoying life now and saving to keep living that way, even if it means working for the rest of their lives, suggests a new study by Bank of America Merrill Edge.
The survey finds that more than half (63%) of Millennials are saving for financial freedom or the ability to fund living the lifestyle they desire; meanwhile, 55% of Generation Xers and Baby Boomers are saving to leave the workforce.
Merrill Edge notes that Millennials are “significantly more likely to focus on working their dream job (42%, compared to 23%) and traveling the world (37%, compared to 21%) than their older counterparts. Millennials are also less likely to prioritize getting married (43%, compared to 51%) and being a parent.
It seems several young people are striving more to have enough money to “live in the now” than prepare for traditional life milestones like having a family. Merrill Edge finds many are spending now on traveling (81%), dining out (65%) and exercising (55%). The firm notes that the main driver of these spending habits is a Fear of Missing out (FOMO).
However, this is not to say Millennials are deficient in proper savings habits. Even though only 8% of all respondents said they believe Millennials are doing a good job at saving, this generation is saving 36% more of their annual salary than their generational counterparts.
“This spring’s report shows us even more differences between how Millennials and their parents view and save for the future,” says Aron Levine, head of Merrill Edge. “Young adults tell us they are willing to do whatever it takes to achieve freedom and flexibility, even if it means working for the rest of their lives. To ensure success, it’s increasingly important these younger generations take a hands-on, goals-based approach to their long-term finances and prioritize saving in the short term.”
But when it comes to retirement, the majority of respondents across all age groups (56%) believes people should be required to save on their own for this milestone. Because it seems many Millennials aren’t prioritizing saving for retirement, plan sponsors and their advisers can benefit from leveraging targeted strategies to help this cohort save for goals beyond living a desired lifestyle, such as saving for unexpected emergencies and health care expenses. A good place to meet them where they are may be through technology. But while Millennials are often cited as the tech-savvy generation, Merrill Edge finds that digital’s impact spans generations.
Overall, two in five Americans say they make and manage their investments through an online or mobile portal. One in eight are currently using a robo-adviser or would consider doing so in the next year. This figure jumps to 22% among Millennials. Across generations, respondents also said investing via mobile makes them feel knowledgeable (51%), empowered (31%) and savvy (14%). These findings may suggest advisers can benefit from utilizing financial technology as a tool to help clients feel more in control of their finances.
“We’re at a pivotal moment in time, when our physical and digital worlds are intersecting more than they ever have before,” says Levine. “This growing shift is driving our high-tech and high-touch approach to innovation, and the beauty is that consumers are recognizing that planning for their later years is not a one-size-fits-all process. With new technologies, customers have the flexibility to be hands-on with their investment decisions, while still consulting an adviser to help navigate complexities as their lives change.”
And it seems most people, regardless of age, expect technology to become an even bigger part of their financial lives down the road.When asked about predictions about the next decade of investing, Americans believe emerging technologies will allow more people to invest (41%), most investments will be automated (34%), and the 401(k) account will no longer be the “gold standard” (29%).
Merrill Edge’s survey was conducted between March 21 and April 5 by market research company Convergys. It consisted of 1,023 mass affluent respondents throughout the U.S. Respondents in the study were defined as aged 18 to 34 (millennials) with investable assets between $50,000 and $250,000 or those aged 18 to 34 who have investable assets between $20,000 and $50,000 with an annual income of at least $50,000; or aged 35-plus with investable assets between $50,000 and $250,000.
The full report can be found at MerrillEdge.com.