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Mass Affluent Say Their Financial Behavior Would Make Their Parents Proud

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Eighty-five percent of mass affluent Americans in a new Merrill Edge Report said their parents would be proud of how they manage their finances today, Bank of America reported Friday.

The report put this down to savvier spending habits and meaningful improvements in their financial lives it said most Americans had made over the past year.

Forty-five percent of study participants said they had strived to improve their credit score, 43% had worked toward paying off some or all of their credit card debt and 35% had established an emergency fund by setting enough aside to live on for three months.

Far fewer people reported paying only the minimum balance on their credit card, spending more than half of their paycheck on a single purchase or dipping into their retirement savings.

Four in five parents in the study said they wanted to leave an inheritance to their children, and four in 10 reported making sacrifices to their current lifestyle to do so.

These included cutting back on dining out and entertainment and reducing their travel and vacations. Others said they were delaying retirement, taking on a second job or working longer hours in order to leave an inheritance.

The report said these proactive steps may be leading affluent Americans to a higher level of confidence about their financial futures. Consider that 44% of Gen Zers and 48% of millennials in the study believed they would be millionaires one day.

Moreover, 80% of Americans across generations expressed confidence in their ability to retire when they wanted and to leave money behind for their children, 77% expected to pay off student loan debt and 57% looked forward to buying a second or vacation home.

The report noted that many affluent people were also aligning their spending with their values. Four in 10 study participants said they were willing to spend more at a retailer whose values they respected, and would stop buying products from companies whose values were fundamentally in conflict with theirs.

All of these positive efforts deserve a reward, right? Seventy-one percent of Gen Zers, 66% of millennials, 42% of Gen Xers and 43% of baby boomers thought so.

The most popular rewards across all age groups included purchases of such things as clothing, shoes or jewelry; taking a vacation; eating at a nice restaurant; and indulging in spa/beauty treatments.

The report’s findings came from an online survey conducted by Concentrix from April 17 to May 9 among 1,000 mass affluent respondents throughout the U.S. and an oversample of 300 similar respondents in Atlanta.

The full sample comprised Gen Z respondents (ages 18 to 23) who had either investable assets between $50,000 and $250,000 or investable assets between $20,000 and $50,000 and annual income of at least $50,000; and respondents 24 and older with investable assets between $50,000 and $250,000.

Mental and Physical Stress

Even as Americans are becoming more conscientious about money and attentive to their spending, many survey respondents reported that their financial life affected both their mental and physical health — younger generations more than older ones, women of all ages more than men:

  • Gen Z: mental health – 73%, physical health – 69%
  • Millennials: mental health – 69%, physical health – 66%
  • Gen X: mental health – 58%, physical health – 54%
  • Boomers: mental health – 40%, physical health – 38%
  • Women: mental health – 64%, physical health – 60%
  • Men: mental health – 52%, physical health – 51%

The study found that half of respondents were worried about their finances over the next five years. They were chiefly concerned about the potential for inadequate savings, political instability, a recession and market volatility.

Another source of worry was debt. Excluding their mortgages, 73% of respondents reported carrying some form of debt, mainly credit cards, auto loans, student loans and personal loans.

Forty-six percent of respondents said they owed more than $20,000, while 18% owed $50,000 or more.

In order to pay off debt, 68% of respondents said they were putting off certain activities and milestones: a vacation, buying a car or a home and having children.

“On the bright side, Americans are prioritizing their financial goals, and taking steps towards improving their futures,” Aron Levine, Bank of America’s head of consumer banking and investments, said in a statement. “However, many find managing their money today causes them a great deal of stress.”

Levine said it was important to find the right balance of short- and long-term planning, and to always move forward without burdening one’s current financial situation or well-being.

A need to deal with debt and overcome finance-related stress appear to be prompting many Americans to seek help. Fifty-five percent of respondents said they were currently turning to professional financial guidance, either in person or online, and two-thirds planned to do so in the future.

A growing number are also embracing new technology and financial apps to help save and manage their money.

Generational Wealth Transfer

Amid the enormous generational wealth transfer now underway, 39% of survey participants said they expected to inherit or already had inherited all or part of their family’s estate: 68% cash, 57% personal property, 53% real estate and 41% securities.

Not only that, 58% believed that their financial stability and lifestyle would benefit significantly or only be made possible by an inheritance from their family.

Although 92% of respondents said they planned to leave money and other assets behind, mainly to their children, spouse/partner, siblings and charities, many did not have a plan in place to do so.

Sixty-four percent had not consulted with a financial professional about their estate planning, including 46% of seniors and 59% of baby boomers. One in three parents said they preferred to transfer wealth to their children now rather than after death.

“Creating a long-term financial plan with reasonable, achievable goals along the way is important,” David Poole, consumer investments solutions and client services executive at Bank of America, said in the statement.

“This can help Americans find a balance between living the lifestyle they want now, while working toward major milestones and leaving a legacy for their children.”