- Bill Tommins, southern Connecticut market president for Bank of America. (Photo by Reece Alvarez)
Millennials, the most closely-watched generation since the Baby Boomers, are an optimistic bunch despite having struggled to find their professional and financial footing as they came of age in the great recession, a study of 18- to 34-year-olds by Bank of America revealed.
“We are very focused on the cohort; they face a very unique set of challenges in the economy, but their behaviors are certainly going to shape our economy going forward,” said Bill Tommins, Bank of America”™s market president for southern Connecticut. “What they say they are doing and what they are actually doing diverges somewhat, particularly in the areas of savings and retirement.”
According to Bank of America”™s Fall 2015 Better Money Habits Millennial Report, a measure of more than 1,300 millennials”™ financial attitudes and priorities conducted in concert with USA Today, millennials across the country are reasonably confident about money and are focused on their finances. But they are also experiencing a great deal of stress around the topic, due in part to factors out of their control, including a volatile global economy.
“This is a population that has very strong self-confidence about their ability to manage their finances,” Tommins said. “Eighty-four percent indicated they are somewhat or very confident, but they are thinking about finances and money often. Forty-one percent reflect the fact they are chronically stressed about money, both not being able to put money away as well as current level of debt, budgeting and spending more than they should.”
While 41 percent of respondents also described themselves as financially fit ”” defined as having savings, paying bills, minimizing debt, budgeting and preparing for emergencies ”” the survey indicates that those who stress over finances do so often and to the point of it having a negative impact on their lives.
Of respondents stressed about money, 65 percent of said it affected their emotional well-being, 55 percent said financial anxiety affects their leisure activities and interests, and 49 percent felt that finances had an impact on their relationships.
Forty-two percent stated financial anxiety impacts their physical health, while only 22 percent felt a negative impact on their work performance.
Year-over-year comparisons show that since the fall of 2014, not putting enough money into savings has been the dominant concern for millennials, with 43 percent of respondents expressing a concern this year compared with 41 percent previously.
However, the survey suggests young adults are less stressed than they were then about credit card debt and spending beyond their means, possibly indicating that they may be making improvements to financial management.
The greatest change from the previous year was seen in regards to spending beyond one”™s means. Thirty percent of respondents cited overspending as a concern ”” a decrease of six percent from fall 2014 and the second highest concern following saving. The only other concern to decrease was credit card debt, dropping from 20 percent in 2014 to 17 percent currently.
Not planning or saving for retirement ranked fifth on the list of concerns, with the percent of respondents stating they were concerned rising from 21 percent in 2014 to 24 percent currently.
“We are seeing in the data while they are thinking about retirement, and they are very much focused on it, in the day-to-day they are focused on living paycheck to paycheck,” Tommins said.
Contrary to the stereotype of the clueless millennial living in his or her parents”™ basement, Tommins said the financial woes of millennials are not due to a lack of money management knowledge, but rather the result of the unique set of circumstances that have coincided with their entry into adulthood.
“This is a very bright, astute and technologically savvy population, but they have come into the workforce and the economy in a really difficult recessionary period. It”™s not a lack of knowledge, just perhaps maybe not having the right opportunity out of the gate to start their career in the traditional trajectory others have had the benefit of,” he said. “They are working in a period of slow growth, some things that were afforded to other segments of the population right out of school they haven”™t had the same luxury of having.”
From general observations, Tommins said it is clear that millennials are postponing major life decisions like buying their first home and saving for their retirement. They are also managing larger amounts of student debt, experiencing greater instances of underemployment and faced significant job reductions at the start of recession, he said, but the same tenants of fiscal management apply to today”™s generation as much as previous ones.
“It is really recognizing that certain things you don”™t want to put off because that will make it harder, particularly as people are living longer,” he said.
To help millennials get started with healthy financial habits, Bank of America has teamed with the Khan Academy, a non-profit providing free financial education and resources, to produce the online resource BetterMoneyHabits.com.
The free online resource provides information on a wide range of personal finance topics from paying down debt to buying a home.
Tommins urges young adults to take advantage of saving tools like 401(k)s and IRAs, as well as building sufficient emergency funds with at least six months of living expenses tucked away in case of a sudden change in income or expenses.
“The sooner you start, the better,” he said, “It just avoids having to play a lot of catch-up later in life.”
