We've almost always branded millennials as the sweet spot businesses are nowadays trying to hit, what with this generation's $200 billion yearly spending power.
We've tagged this demographic following Generation X as financially influential--shaking up and setting trends for a broad spectrum of industries from fashion, food, and entertainment to real estate and health care.
These young consumers have even saved some industries from near oblivion. One is the fitness industry, which suffered continuous revenue decline in 2004-2013, even with increased membership.The millennials' spending on gym memberships and sports accessories have lifted the fitness industry to new heights.
In 2001, coffee prices were at the lowest they’ve ever been–but not anymore.Millennials won’t skimp on their caffeine.Majority of millennials admit to regularly spending more than $4 on coffee, according to Charles Schwab’s Modern Wealth Index, compared with 40% of Gen X, and only 29% of baby boomers.While the sale of coffeemakers has declined, out-of-home coffee sales have exploded in the past few years.
Now, the financial services or wealth management sector is also setting its sight on these young spenders.But surprisingly, American financial advisor BMO Wealth Management released a report saying millennials are generally troubled by their finances even more than their personal relationships and jobs.
In the report titled "Generation Why," over a thousand millennials aged 18-34 were surveyed on their thoughts on personal traits, personal and financial goals, saving options, life priorities, and retirement planning.The study concluded that this commercially powerful generation largely lacks financial literacy and would need some help for them to save for their future.When asked what personal matters concerned them the most, 65% of the respondents cited their financial situation over and above their personal relationships and jobs.
More than a quarter believe retirement is too far off to start saving, opting instead to focus on more immediate priorities.The study also found millennials to be "very conservative" with saving, with nearly half of the respondents preferring to put their money in savings accounts to save up for major purchases like buying a house.Millennials do not view saving for retirement as an immediate priority, the BMO study said.While 25% said they are worried about their ability to ever afford to retire, only 10% 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 % of respondents said they would rather pay off their accumulated debts first before starting to save for retirement.The survey also found that both millennial men (37%) and women (29%) are concerned about their lack of financial literacy.The lack of financial expertise may have an impact on millennials' future financial outcomes, the study said.
"As millennials' incomes grow, financial planning and literacy will become even more important in order for them to achieve their financial goals," said Stephen Williams, Senior Vice President of Wealth Planning, BMO Wealth Management (U.S.). "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.
Another investment advisor, Charles Shwab, also came up with a recent study that reveals something about American millennials financial profile, based on what the firm calls the "Modern Wealth Index," which tracks how well Americans across the wealth spectrum are planning, managing, and engaging with their wealth.The study said Gen X and baby boomers are more likely than millennials to make loan payments on time and pay credit card balances in full.
Only 33% of the millennial respondents said so, compared with 43% of the Gen X and 50% of the boomers.Also, millennials and those with a written financial plan were also found to be most likely to be aware of brokerage or investment account fees. A majority or 84% of the millennial respondents said so, compared with 75% of the Gen X and 65% of the baby boomers.