Are Millennials Saving for the Wrong Reasons?
Survey after survey points to the millennial generation as the most financially responsible generation around. Survey results also indicate that the Millennial generation is the generation that saves the highest percentage of income. A new survey by the Merrill Edge Report shows that the Millennial Generation might be very conflicted when it comes to money and why they are saving so much.
The report states that 63 percent of millennials are saving to live their “desired lifestyle,” versus 45 percent of both baby boomers and Gen Xers. 55 percent of boomers and Gen Xers are saving to leave the workforce, whereas only 37 percent of millennials are planning for a traditional retirement. According to the report, “the majority [of millennials] say they’re more likely to spend money on travel (81 percent), dining (65 percent) and fitness (55 percent) than save for their financial future.” Said another way, it is about saving for the now and immediate future versus saving for future financial independence (retirement).
The report goes onto say that “millennials are the first generation to plan long-term for financial freedom instead of retirement and “young adults tell us they are willing to do whatever it takes to achieve freedom and flexibility, even if it means working for the rest of their lives.”
I have a different take away regarding the results of the survey. My take away is that Millennials have an odd way of defining financial freedom and flexibility. Working for the rest of your life robs you of your freedom and flexibility. Rather financial freedom is defined as the day that you chose to earn an income. We spend most of our life without that choice. We have to work and earn income until we have enough put back to replace that income. I refer to it as your financial independence day.
Why do you suppose we are getting survey results like this? After all, other surveys show that this generation is doing just about everything right when it comes to money. I think the reason is two-fold.
First, Gen Xers and Baby boomers have done a poor job modeling financial responsibility and a large percentage of those two generations will be forced to work longer than they intended because they can’t afford to retire. So, millennials could walk away with the following belief: “Why set your savings goals on retirement and enjoy it now since retirement doesn’t seem to work? After all, my parents aren’t in good financial shape or ready for retirement.”
Second, Millennials had a front row seat to watch their parents go through the financial crisis and that has affected their attitudes about investing for the long-term. It is no different than those who were Great Depression kids. Great Depression kids were greatly influenced by that time period in our history.
Of course, this is all speculation on my part. This is just a huge shift for a generation to take on an attitude so far to the left of traditional saving and investing objectives. I was hopeful that we would see a different shift when it comes to money and a financially responsible world would start to develop. Unfortunately, it looks like as financial independence goes, this generation is no different than generations that have gone before them. The irony is that it won’t be because of bad financial habits.