Millennials today are positioning themselves to be in better financial shape than their older counterparts, according to an Allianz Life survey released Tuesday.
At the same time, the siren call of social media could undermine their best intentions, the study found.
As evidence of what Allianz Life called “millennials’ financial Achilles’ heel,” 55% said they had experienced a fear of missing out (FOMO), and 57% reported unplanned spending because of something they had seen on their social media feeds.
Eighty-eight percent of millennial respondents also agreed that social media reinforced a tendency to compare one’s wealth/lifestyle with that of others, compared with 71% of Gen Xers and 54% of boomers who believed this.
Six out of 10 millennials reported feelings of inadequacy about their own life and what they had because of social media. Allianz Life said that perhaps because of FOMO, half also claimed they spent more money going out than on rent or mortgage.
“Millennials are finding innovative ways to build their financial strength and are becoming more confident because of these actions,” Allianz Life’s vice president of consumer insights Paul Kelash said in a statement.
“But, more than any other generation, social media and the allure to spend beyond their means could have long-term negative effects on their finances if they’re not careful.”
Allianz Life commissioned the survey, which was conducted online last May by Larson Research + Strategy among 3,006 U.S. adults, ages 20 to 70, with a minimum household income of $30,000.
Contrary to notions about their financial irresponsibility and frivolous spending habits, 77% of millennials surveyed said they felt financially confident, compared with 64% of Gen Xers, and 48% who had a 401(k) said they contributed 10% or more monthly, compared with 44% of baby boomers and 36% of Gen Xers who reported the same.
The study also showed that millennials are better savers than older generations: 41% said they always set aside money each moth for saving, compared with 36% of Gen Xers, and 58% considered saving for retirement a basic necessity, similar to housing or food.
Seven in 10 millennials said they used “tricks” to make saving money easier, for example, maintaining several different accounts to automatically save their money for specific purposes.
Millennials also reported their median retirement savings to be $35,000, which was equal to Gen Xers’, who have less time to build their nest egg.
But does that mean millennials will be ready for retirement? Recent academic research raises doubts.
Recession’s Long Shadow
Recent financial upheaval has also had a profound effect on millennials, Allianz Life reported. Twenty-four percent of those surveyed saw their parents suffer a major financial setback during the 2000–2009 recession.
Possibly as a result, 57% said they were unlikely ever to invest in the stock market. In addition, 65% said they were uncomfortable with too much debt because they had seen their parents struggle with it.
“While it’s promising that many millennials are working to avoid debt and build savings, seeing such a large number of them averse to investing is a concern,” Kelash said.
“A balanced approach to saving and investing is a strong recipe for a solid retirement and if they have worries, a financial professional can help them find the right balance.”
Indeed, the study found millennials the most open among respondents to getting help. Although 70% of the youngest respondents said they used online apps or tools to help them manage their money, they also valued human support.
Forty percent of millennials said they had a financial professional and worked closely with that person, compared with only 25% of Gen Xers.
Many millennials in the survey believed that having a financial professional would give them some relief from the pressure of trying to plan for their family’s future, with seven in 10 saying they were overwhelmed by the thought of how they could provide for themselves and their family in the long term.
Forty-two percent of millennials preferred face-to-face communication with an advisor, while 19% said their first choice was phone communication.
— Check out Which Gen Best Feeds the Piggy Bank? on ThinkAdvisor.