- Over half of millennials view their current financial situation as their most concerning personal matter – more so than their personal relationships and jobs
- Almost half of millennials favor saving accounts to save for a specific major purchase over other types of accounts, often to their detriment
- More than a quarter of millennials believe retirement is too far off to start saving, opting instead to focus on more immediate priorities
BMO Wealth Management released a report on July 18 exploring how millennials think about a number of issues that uniquely affect them. The report – titled Generation Why! – underscores why this generation benefits from financial literacy to help them save for their future. The report surveyed 1,003 millennials age 18-34 on topics such as millennial traits, personal goals, saving options, setting financial goals, life priorities, and retirement planning.
The report states that millennials are better equipped to make positive changes by virtue of their skills and education, which exceed those of any previous generation at the starting point of their careers. However, many millennials lack financial literacy. When respondents were asked what personal matters concerned them the most, 65 percent cited their current financial situation as their most concerning personal matter – over personal relationships and jobs.
Reasons and Preferred Methods for Saving
Millennials are generally found to be very conservative with saving. When it comes to saving for major purchases such as buying a home, millennials favor the following methods:
- Savings account (42 percent)
- IRA or 401(K) (13 percent)
- Roth IRA (6 percent)
"IRAs, Roth IRAs and 401(k)s are some of the best plans for helping millennials save for major purchases, such as buying a home or saving for retirement," said Stephen Williams, Senior Vice President of Wealth Planning, BMO Wealth Management (U.S.). "Contributions to these accounts grow tax-free or tax-deferred and savings can significantly accumulate over time. I cannot stress enough to millennials the value of utilizing these accounts for retirement planning and also for other means."
Millennials do not view saving for retirement as an immediate priority. While 25 percent said they are worried about their ability to ever afford to retire, only 10 percent named saving for retirement their top priority. Thirty-seven percent indicated that retirement is simply too far off and that they have more immediate priorities. In addition, 22 percent of respondents said they would rather pay off their accumulated debts first before starting to save for retirement.
Concerns About the Present and Future
The survey also found that both millennial men (37 percent) and women (29 percent) are concerned about their lack of financial literacy. The lack of financial expertise may have an impact on millennials' future financial outcomes.
When asked to name their highest financial priority, respondents cited:
- Paying down accumulated debt (25%)
- Finding meaningful/better-paying work (17%)
- Purchasing or upgrading for a new home (15%)
"As millennials' incomes grow, financial planning and literacy will become even more important in order for them to achieve their financial goals," added Williams. "It is imperative for millennials to engage advisors as they start to map out their financial plans, in order to maximize their financial potential in a way that suits their current lifestyle and helps accomplish their aspirations."
BMO offers the following financial tips for millennials:
Identify goals and create a financial plan: Developing even a basic financial plan can help millennials prioritize goals and determine the actions that can be taken to achieve them. Working with a financial advisor to do this is key as millennials often need additional support and guidance to make the most of their financial resources and strategize goals.
Improve financial literacy: The right financial advisor can provide invaluable guidance to millennials in helping them quickly increase their financial knowledge in areas specific to their goals and concerns.
Insure yourself: Unforeseen events such as illness or a death can happen at any time, even for young and healthy individuals. Insurance can help millennials ensure their plans are not derailed by disability or death, and that they are prepared for out-of-pocket expenses.
To view a copy of the full report, which includes more financial planning tips and additional survey findings explored in detail, please click here.
Read the original press release from BMO.