BOSTON — Picture this: you're 26 years old and have just received the first significant bonus of your blossoming career. You're trying to figure out how you might spend the money: should you travel or go on a shopping spree? Take in a weekend music festival with friends? On the other hand, you may be thinking about making a dent in the debt you've accumulated—or even considering putting a portion away to benefit your financial future. So, who can you turn to for solid financial advice?
According to Fidelity Investments' first-ever Millennial Money Study, far too many Millennials (aka Gen Y, born 1980-1989) struggle to answer that question. When asked who they trust most for information on money matters, one third (33 percent) of Gen Y-ers identify their parents as the top choice, but almost one in four (23 percent) indicate they trust "no one" when it comes to advice about money, making it the second most common response. (Note: Watch a video of Millennials sharing their fears and tips on handling their finances.)
This lack of trust could be an indication that Gen Y-ers tend to be more independent and prefer making their own money decisions. However, 39 percent admit to worrying about their financial future at least once a week or more, suggesting peace of mind is not a universal Gen Y trait. Women tend to be less confident than their male counterparts, with 19 percent of Millennial men saying they never worry about their financial security, whereas only 2 percent of women can say the same.
"Feeling financially 'on their own' about finances also could be fallout from the Great Recession, since many Gen Y-ers witnessed their parents and grandparents struggle with the impact of job losses, tighter budgets, and/or declining retirement accounts," says Kristen Robinson, senior vice president, Fidelity Investments. "Whatever the reason, this generation fortunately has a big advantage—the luxury of time, as nothing is more powerful than the impact of saving early and often."
The Parent Gap
An obvious source for financial counsel is one's parents, and the study revealed a strong connection between Gen Y and family. In addition to being most trusted when it comes to money matters, three quarters (76 percent) of Gen Y-ers indicate they don’t have any difficulty starting conversations with parents about saving and investing for the future. This openness is encouraging, according to Robinson, because engaging in frank family financial conversations helps ensure families are on the same page with regard to goals, while also enhancing the chances for long-term security.
However, while Gen Y may say they have an open door policy, almost half (49 percent) admit they don't ever receive financial advice from their parents—and 27 percent of Gen Y confess to telling parents nothing when it comes to money. This could be a matter of finding the time, given challenging schedules. Another factor could be that while the majority of Millennials (59 percent) consider their parents to be good financial role models, a fairly sizeable number do not.
A Silver Lining: Many Gen Y-ers Serious about Saving
The survey uncovered many positive signs that this young generation is thinking long-term and taking steps to save early. Nearly half (47 percent) have already started saving for retirement, with 43 percent indicating they have a 401(k) and 23 percent indicating they have an IRA. Furthermore, of the top issues Gen Y-ers say they are trying to tackle, more than half (52 percent) place "accumulate more for retirement" at the top of the list.
On the flip side, the news that many don't have money in a 401(k) is cause for concern, as it means some who have access to a 401(k) or workplace plan aren't taking advantage of the "free money" on the table in the form of a company match from their employer, as well as the related financial guidance available through a workplace plan. Professionals suggest saving 10 percent to 15 percent of one's annual pay for retirement, inclusive of both personal and workplace contributions.
"This trend toward saving is encouraging, especially since the oldest of this generation are now juggling competing demands, such as saving to buy a house, raising a family or starting a college fund for their own children," says Robinson. "Finding ways to turn positive savings habits into more deliberate investing strategies can make a huge difference—and may provide the peace of mind many Millennials desire."
Resources to Help Millennials Build a Strong Financial Plan
Fidelity offers a variety of tools specifically designed to meet the unique needs of Millennials:
- The MyMoney web site, which has tools, videos and a wealth of resources targeted to - more - people at the early stages of their investing lives, helping them transition ideas into actions. This includes budgeting tools, helpful articles and step-by-step guidance on saving and investing, including "Saving tips for twenty-somethings," "Ditch debt and start saving," and "Surviving a market meltdown."
- LinkedIn Influencer Kathy Murphy's "If I Were 22 – Get a Financial Head Start" discusses the importance of charting your savings goals and setting aside more starting at an early age.
- For help engaging the entire family in important financial conversations, there’s "Eight Tips for Talking Money with your Millennial Kids" as well as the online series entitled Special Report: Families and Money.
About the Study
The Fidelity Investments Millennial Money Study was a follow-up to the 2014 Intra-Family Generational Finance study, a comprehensive online poll of U.S. parents and their adult children conducted from March 3 – April 9, 2014. The Intra-Family Generational Finance study examined the levels of agreement between families on key financial topics, and included 1,058 parents and 159 adult children. To qualify, parents had to be at least 55 years of age, have an adult child older than 30 and have investable assets of at least $100,000. Children qualified if they were at least 30 years of age, had at least $10,000 saved in an IRA, 401(k) or other investment account.
The follow-up study was designed to ask many of the same financial questions to gain a Millennial perspective and was conducted from April 2 – April 9, 2014 by GfK Public Affairs and Corporate Communication, using GfK's KnowledgePanel®. The study examined a group of 152 adults aged 25 to 34. To qualify, Millennials had to have at least one living parent.
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 $5.0 trillion, including managed assets of $2.0 trillion as of August 30, 2014, we focus on meeting the unique needs of a diverse set of customers: helping 23 million people investing their own life savings, 20,000 businesses to manage their employee benefit programs, as well as providing 10,000 advisors and brokers with technology solutions to invest their own clients' money. Privately held for nearly 70 years, Fidelity employs 41,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit www.fidelity.com.