Just as the Great Depression informed an earlier generation, the recession of 2008 has taught millennials a valuable lesson.
Eighty percent of millennials in a new survey by Wells Fargo said the recession of 2008 had convinced them they had to save “now” to “survive” economic difficulties later on.
But many are not are able to act on this lesson. More than half of millennials surveyed, 56%, said they were “living paycheck to paycheck,” and 40% said their debt was "overwhelming."
Still, 55% of millennials said they were saving for retirement: 61% of men and 50% of women. Well Fargo said the difference in saving rates may have to do with the fact that millennial men reported median annual household income of $77,000, while women had median income of $56,000.
For college-educated millennials, median annual household income is reported to be $83,000 for men and $63,000 for women.
About half of all millennials reported satisfaction with their savings at this point in their lives, but the gender discrepancy was pronounced, with 58% of men feeling satisfied, compared with only 41% of women.
“The silver lining of the recession that started over five years ago is that a majority of millennials get that saving is a necessity and even equate it with ‘surviving’ tough times,” Karen Wimbish, Wells Fargo’s director of retail retirement, said in a statement.
“But millennial women are starting out their working lives making far less than men and, as a consequence, are saving less and feeling less contentment at the start of their working lives.”
Harris Poll conducted the online survey on behalf of the Wells Fargo Wealth, Brokerage, and Retirement between April 15 and May 2. Survey respondents included 1,639 millennials age 22 to 33, as well as 1,529 baby boomers ages 49 to 59.
Forty-two percent of millennials said debt was their biggest financial concern at present, and 40% said their debt was “overwhelming,” versus 23% of baby boomers who felt the same.
Forty-five percent of millennial women said they felt overwhelmed by debt, whereas 33% of millennial men felt that way.
Twenty-nine percent of millennials said their number one financial concern after paying day-to-day bills was paying off student loans. Forty-four percent of boomers cited saving for retirement as their top financial concern.
Despite the student loan albatross, 76% of millennials said their college education had been worth the cost.
Millennials reported the following breakdown, on average, of their debts as a percentage of monthly pay:
- Credit card debt, 16%
- Mortgage debt, 15%
- Student loan debt, 12%
- Auto debt, 9%
- Medical debt, 5%
Among all millennials, 47% were allocating half or more of their paychecks to these types of debt.
Retirement and Saving
Gender differences popped up again in questions about progress in accumulating investable assets. College-educated millennial men reported median household investable assets of $58,500, while college-educated millennial women reported $31,400.
Of millennials who had started saving, 46% were saving between 1% and 5% of their income for retirement, 31% were saving 6% to 10%, and 18% were saving more than 10%.
About a third of both women and men were saving at the 6% to 10% level. And 26% of millennial men were saving at a rate greater than 10%, while only 9% of women were doing so.
Seventy-two percent of millennials were confident they would be able to save enough to create the lifestyle they wanted in the future, but only 63% of women expressed confidence, compared with 80% of men.
Of the 45% of millennials who were not saving yet, 84% said this was because they did not have enough money to save at present, with no difference between genders.
Wells Fargo said that, perhaps as a way to lock down a savings discipline, 56% of boomers and 55% of millennials favored a mandatory retirement savings policy.
Eighty-four percent of millennial men and 70% of women expressed confidence that they had the knowledge to address any financial problems in the next 10 years.
Despite their confidence, 40% of millennials said they had “no idea” what amount would be necessary to meet their retirement needs. Thirty-one percent said would need less than $1 million, while 15% said they would need $1 million to $2 million.
In contrast, 54% of boomers couldn’t estimate how much they would need in retirement, with 12% saying $500,000 to $1 million and 12% saying $1 million to $2 million.
Confidence in the Stock Market
Majorities of both millennials and boomers said the stock market was the best place to invest for retirement.
However, only half of millennial women versus two-thirds of millennial men agreed that the stock market was the best place to invest for retirement.
A quarter of those respondents who were saving for retirement weren’t sure how much of their savings were invested in stocks or mutual funds.
About a fifth of millennials currently saving for retirement said they were invested 100% in stocks or mutual funds, while a quarter said they were in a range of 50% to 75% in stocks or mutual funds. About a third said they were invested 25% or less in stocks or mutual funds.
As to whom they trusted for credible information to help them make financial decisions, 57% of millennials cited family, 54% financial institutions and 50% personal finance experts/personalities.
For their part, 57% of boomers trusted personal finance experts/personalities, 45% financial institutions and 40% family.
Although 55% of millennials didn’t think they had enough money to have a financial advisor, 16% were using a paid professional.
Fifty-nine percent of respondents who didn’t use a paid advisor said they would prefer a “seasoned” one, while 26% would look for an advisor closer to their age who would potentially better understand their financial goals.
Millennials felt confident in many aspects of their personal lives, with 69% saying they felt better off financially than others in their own generation. In addition, 68% expected their standard of living before retirement to be better than their parents'.
Eighty-four percent of millennials feel they had the skills to succeed in their career goals when they are 40, and 78% believed that if they lost their job they could find a comparable one within a year.
Women and men millennials felt differently about building their careers, with one in five millennial women “worried” about their ability to build a career in their desired profession versus one in 10 millennial men.
Check out 7 Things Advisors Must Know to Win Young Male Clients on ThinkAdvisor.