BOSTON — When it comes to the relationship parents have with their children, are the financial cords ever truly severed—even when they reach adulthood? As with so many generations that have come before them, Fidelity Investments' second biennial Millennial Money Study reveals that while Millennials may strive for financial independence, nearly half (47 percent) have let their parents pay for certain items at some point since being on their own. While some of these can be considered part of "family plan" expenses parents typically cover that are continuing into adulthood (such as cell phone plans, utilities, movie and TV streaming services and cable), there has also been a recent increase in those residing at home with their parents, with 21 percent of Millennial respondents reporting they are currently living under their parents' roof. (Note: Watch a video of Millennials and their parents discussing finances.)
The good news is there are benefits to maintaining certain financial connections that may be paying off when it comes to saving. In fact, 85 percent of Millennials say they have some form of savings in 2016 (up from 77 percent in 2014). A significant portion has been earmarked for life's unexpected curveballs, as 59 percent of Millennials have set aside an average of $9,100 in an emergency fund, more than older generations (Gen X-ers have $8,700, while Boomers have $7,100); Millennials report this amount will cover six-and-a-half months of living expenses. Looking even more long-term, 60 percent of Millennials are also saving for retirement, up from 51 percent in 2014.
"Aside from giving their kids a financial leg up, parents can also take credit for being money role models. In fact, 65 percent of Millennials say their parents have provided good examples of how to build a successful financial future, and the study suggests that's exactly what this forward-thinking generation is doing," says Kristen Robinson, senior vice president, Fidelity Investments. "Developing sound savings habits at an early age provides a number of big advantages. The impact of saving early and consistently is powerful, whether for short-term goals like buying a car or booking a dream vacation or for larger goals like buying a home or saving for retirement."
Investing: The Final Fiscal Frontier?
The study reveals Millennials are showing some hesitancy when it comes to investing and making the most of their hard-earned money. Taking into account the effects of inflation, many are limiting themselves in terms of their return on investment in the long-run by perhaps being too conservative.
For example, for those with an emergency fund, 86 percent are storing at least a portion of that money in a traditional savings account, where it's likely to earn less than 0.25% in interest.1 And even though almost two-thirds (62 percent) of Millennials currently have an investment account, only nine percent view themselves as investors. The larger majority consider themselves either spenders (44 percent) or savers (46 percent).
Their mobile habits bear this out, as well. Although research shows Millennials spend three hours a day on mobile apps, it's unlikely all that time is spent on finances. According to the Fidelity study Millennials use a mobile app for financial transactions such as accessing checking/savings accounts (61 percent), managing credit cards (52 percent) and paying bills (49 percent), but far fewer are actively checking their brokerage (14 percent) or retirement accounts (18 percent). While this may be appropriate since investing is often intended for the long-term, monitoring investment accounts or taking corrective actions on investments should be made as a part of one's overall financial plan.
Ironically, despite the connections Millennials have with their parents when it comes to money matters, many shy away from sharing how they are handling their own savings and investments. More than one-third (34 percent) admit they find it difficult to start these conversations with parents, an increase from 24 percent in 2014. Perhaps this is the one final fiscal frontier where parents can make a big difference in their children's financial well-being: helping their children shift from a mentality focused on saving their income to one that also invests to grow wealth.
"Many young adults are interested in investing, but sometimes feel hesitant in taking that initial step," says Robinson. "Everyone needs to start somewhere, and with a bit more knowledge and experience under their belt we anticipate Millennials will feel more comfortable engaging in conversations with family and friends and will start exploring how they can make their money grow. Finding ways to turn positive savings habits into positive investing strategies will help Millennials gain greater confidence, and ultimately financial independence."
Resources to Help Millennials Build a Strong Financial Plan
For those looking to learn more about investing while on the go, Fidelity Mobile® is available for Apple® and AndroidTM devices and features a free beta "Learning Center" with eight programs to start, designed to expand investing smarts on topics ranging from "What is a Mutual Fund" to "Building a Portfolio." To get started, download the Fidelity Mobile app.
In addition, MyMoney is an educational site with videos, calculators, infographics, and articles geared for those experiencing many financial firsts. Resources cover topics such as building a budget, how to start investing, ways to earn more on savings, and a video showing how to prioritize debt, as well as much more available at www.fidelity.com/mymoney. Also, for family members looking to share financial guidance with the young adults in their lives, visit www.fidelity.com/familysharing to email online learning kits related to buying a home, budgeting and spending, investing 101 and more.
About Fidelity Investments
Fidelity’s goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.6 trillion, including managed assets of $2.1 trillion as of July 31, 2016, we focus on meeting the unique needs of a diverse set of customers: helping more than 25 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for nearly 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.
About the Study
The Fidelity Investments® Millennial Money Study is a follow-up to the 2014 Millennial Money Study. The study was conducted from July 27 to August 2, 2016 by GfK Public Affairs and Corporate Communication, using GfK's KnowledgePanel®. In total 615 adults, 25 to 70 were interviewed: 305 were Millennials (born after 1980, although for the purposes of this study, Millennials are defined as between 25-35 to ensure they were old enough to work full-time), 155 were Gen X (born 1965–1979) and 155 were Boomers (born 1946–1964). To qualify respondents had to have either a living parent or an adult child over the age of 18. Data was weighted to bring each group in line with the population they represent.