HOW MILLENNIALS ARE REWRITING RULES OF FINANCIAL PLANNING
Rather than putting money away for retirement, young people are saving so they can afford to go where they want and do the job that they desire
If you’ve read the latest headlines, you know millennials get a mixed financial rap. Some reports say they are throwing their money away on avocado toast and dining out, while others claim they are killing the earnings of restaurant chains by cooking at home more.
Whatever you believe about their financial habits, some millennials at least are sitting on six-figure retirement accounts. In a Fidelity Investments analysis of 59,000 millennials in the United States – those born between 1981 and 1997 – who have participated in their company’s 401(k) plan, America’s pension scheme, for 10 years, the average balance was US$109,400 at the end of June 2017.
This isn’t thanks to rich parents. These savers can’t all work in investment banking. And odds are that at least some have student loan balances. Rather, the common thread – and the secret to a wealthy retirement – is consistency.
And there’s a reason why they are being consistent. According to a report released earlier this year by Bank of America’s online discount brokerage, Merrill Edge, millennials are the first generation to plan long-term for financial freedom over retirement.
The majority, at 63 per cent, are looking to save a set amount of money or income necessary to enjoy their desired lifestyle, compared to 55 per cent of Gen Xers and baby boomers who are saving so they can leave the workforce. This younger generation also have a different outlook on traditional lifetime milestones. When asked about their top life priorities in life, today’s 18- to 34-year-olds are more likely than their older counterparts to focus on personal milestones such as working their dream job (42 per cent versus to 23 per cent) and travelling (37 per cent versus to 21 per cent).
So what is the best way for millennials to achieve those goals along with their ideal of financial independence in the future?