The generation with ginormous plans–and expectations–just got ginormouserer, or something. Millennials, it seems, are saving for lifestyle, not retirement. Forget deferred gratification, they want it all, and they want it now.
The demographic of Tom Haverfords is looking to achieve “the amount of savings or income necessary to live their desired lifestyle, which drastically differs from most Gen Xers and baby boomers who are saving to leave the workforce,” according to the latest Merrill Edge Report.
The survey, which calls the traditional idea of retirement officially extinct, outlines “a change in how younger generations define life milestones and what it means to be an adult.”
When asked about their top priorities in life, retirement saving was nowhere in sight. Millennials were significantly more likely than their older counterparts to focus on personal milestones of working at their dream job (42 percent, compared to 23 percent) and traveling the world (37 percent, compared to 21 percent).
Today’s 18- to 34-year-olds are also far less likely to prioritize traditional life milestones, including being married (43 percent, compared to 51 percent) and being a parent (36 percent, compared to 59 percent).
“This spring’s report shows us even more differences between how millennials and their parents view and save for the future,” Aron Levine, head of Merrill Edge, said in a statement. “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.”
Millennials’ “fear of missing out” (FOMO) philosophy is also evident in their spending habits, as the majority say they’re more likely to spend money on traveling (81 percent), dining out (65 percent) and exercising (55 percent) than saving for their financial future.
Savings perceptions versus realties
Although 45 percent of millennials consult their parents “always” or “often” for advice on financial matters, perhaps parents should be consulting their children.
The report found every generation views their elders as superior savers–54 percent of respondents say the Greatest Generation does a “very good” job, followed by baby boomers at 45 percent, Gen Xers at 19 percent and millennials at only 8 percent, including only 15 percent of millennials themselves.
However, when asked how much of their income they save annually, millennials say they save 36 percent more than their generational counterparts, with over one-third of millennials putting more than 20 percent of their salary toward savings goals.
Overall, 42 percent of respondents are saving less than 10 percent of their salary, for retirement or anything else, and 7 percent don’t save at all. This broader savings gap may be the reason why respondents don’t feel prepared for life’s “what-if” scenarios:
- Seventy-one percent are not very confident they could achieve their financial goals if they were to get divorced, with just 5 percent planning for the possibility.
- Sixty-four percent say they are not very confident they could be financially successful if they had children, with just 23 percent saving for a family.
- Forty-eight percent are not very confident they could achieve their goals if they outlived their significant other.
The future of investing
Two in five Americans say they make and manage their investments through an online or mobile portal. One in eight Americans are currently using a robo advisor or would consider doing so in the next year, and this number jumps to 22 percent among millennials. Overall, respondents cite this ability to invest via mobile makes them feel knowledgeable (51 percent), empowered (31 percent) and savvy (14 percent).
When asked about predictions for the next decade of investing, Americans believe emerging technologies will allow more people to invest (41 percent), most investments will be automated (34 percent), and the 401(k) account will no longer be the “gold standard” (29 percent).
“We’re at a pivotal moment in time, when our physical and digital worlds are intersecting more than they ever have before,” Levine added. “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 advisor to help navigate complexities as their lives change.”
