By Jim Chapman, director, Wells Fargo Institutional Trust & Retirement
As millennials soon will toss their graduation caps and hope to land their first “real job,” they will face managing their finances while in the red.
According to our recent Wells Fargo study on millennials’ attitudes toward savings and retirement, more than half (54%) of them say debt is their “biggest financial concern currently,” surpassing day-to-day expenses. Forty-two percent say their debt is “overwhelming,” double the rate of boomers surveyed for comparison.
Our Wells Fargo study surveyed millennials between the ages of 22 and 32. Boomers surveyed were between the ages of 48 and 66.
Millennials talked about the barriers they faced when it came to saving money. For 87% of them, they literally didn’t have “enough money to start saving,” and another 81% were focused on paying down their debt first.
Even with those barriers, 61% of millennials say they consider themselves to be “savers.” But there is a difference between perception and reality, and the fact is, just about half (49%) have actually started to save for retirement. The remaining 51% are putting off saving for retirement until their 30s.
In our business, we fundamentally believe in the value of regular, disciplined saving no matter the level and at every age. We also believe that starting out young in a savings journey is crucial. For this generation, especially, saving shouldn’t be an ‘either or’ option. It’s crucial for millennials to both manage their debt today and start saving for the future. This is a way for them to apply their multi-tasking expertise to their finances!
All the benefits of starting young are hard to make up later. Millennials who are disciplined at saving early and regularly, and are saving as much as possible can greatly benefit from the power of compounding. Ultimately, it may help them create a more confident financial future.
Members of the millenial generation are very confident in their own abilities to create the future they want for themselves. Two thirds (67%) of millennials believe they will achieve a greater standard of living than their parents. Almost three-fourths (72%) of millennials told us they feel in control of their future and believe they can achieve their goals.
Interestingly, millennials are career-minded. Three out of four surveyed (75%) feel the best way to get ahead financially is to work for a company that offers a career path versus a quarter of millennials (25%), who feel the best way to get ahead financially is to “break out on my own and start a business.” Again, these attitudes could likely trace back to the recent financial crisis and uneven financial recovery causing continued uncertainty.
We’re hopeful that millennials will be able to thrive, despite the economic odds they may face when first entering the job market. They are themselves hopeful, based on data in our survey. Millennials are very optimistic with 70 percent saying they are “very” or “somewhat confident” that they will be able to save enough to afford the lifestyle that they hope to have in retirement. It’s time for this generation to translate their optimism into action by taking some basic steps to build a financial foundation.
Three steps to consider:
1. Begin saving as you pay down debt. Set up an automatic deposit into your savings account so it builds up on a regular basis.
2. Create a retirement roadmap, either online or with a financial advisor, to set clear goals for saving and spending in order to accumulate enough for your future. If you’re saving in an employer-sponsored retirement plan, consider setting annual automatic increases to ensure this remains a priority over time.
3. Invest a small amount in the stock market to potentially give yourself a clear picture of how compounding returns help as you build finances for the long-term.
Ultimately, the key for millennials is to put a financial plan into action, so their beliefs become a reality.