Money-wise, millennials have got it together, with one big caveat — their use of social media and how it influences their spending.
The influence is actually stunting the financial growth of many young investors and savers, according to a study by Allianz Life Insurance Co.
But before we go negative, let’s look at all the things millennials are doing right.
Finances by the numbers
Millennials are positioning themselves to be in better financial shape than other generations:
- Seventy-seven percent of millennials feel financially confident, compared to 64 percent of Gen Xers.
- Forty-eight percent of millennials with a 401(k) contribute 10 percent or more of their paycheck every month.
- Forty-one percent set aside money each month for savings.
The median retirement savings for millennials is $35,000 — equal to Gen Xers, who have less time than the younger generation to build a retirement nest egg.
Smart money managers
Millennials are clever about saving for what they want. Seventy-one percent use financial tricks to meet financial goals. For example, the majority of millennials use different accounts to automatically save money for specific purposes, such as everyday expenses, a special trip or a particular loan.
Seventy percent of millennials use online apps or tools to help them manage money. And 40 percent say they work closely with a financial professional, compared with just 25 percent of Gen Xers.
These are all sound and good financial habits.
Negative influence of social media
And now for millennials’ financial vulnerability: social media. Fifty-five percent of millennials say they fear missing out and 57 percent have spent money they hadn’t planned to spend because of what they see on social media feeds. Perhaps because of this fear of missing out (FOMO), half of millennials say they spend more money on going out than they do on their rent or mortgage.
Eighty-eight percent of millennials believe social media creates an environment in which users compare their wealth and lifestyles with others. (This compares with 71 percent of Gen Xers and 54 percent of baby boomers.) Sixty-one percent of millennials say they feel inadequate when they make these comparisons.
“Millennials are finding innovative ways to build their financial strength and are becoming more confident because of these actions,” said Paul Kelash, vice president of consumer insights for Allianz Life. “But, more than any other generation, social media and the allure to spend beyond their means could have long-term negative effects on their finances if they’re not careful.”
Fear of investing
Millennials also are influenced by what their parents experienced in the Great Recession.
Twenty-four percent of millennials saw their parents suffer a major financial setback during the recession of 2008-09. Possibly because of this, 57 percent say they are unlikely to ever invest in the stock market. And 65 percent are uncomfortable with too much debt because they saw their parents struggle with it.
“While it’s promising that many millennials are working to avoid debt and build savings, seeing such a large number of them averse to investing is a concern,” Kelash said. “A balanced approach to saving and investing is a strong recipe for a solid retirement and if they have worries, a financial professional can help them find the right balance.”
For the uninitiated, here’s Money Management 101
If you’re just getting started on saving or trying to manage your money better, here are 10 tips.
Keep on saving. Millennials save more than older generations. Save for retirement, save for an emergency — just keep saving.
Don’t shy away from investing. The Great Recession was bad, but don’t let that scare you away from investing. Here’s how to overcome fears of investing.
Get sound advice. Find a trusted financial professional to help you weigh big financial decisions.
Break bad habits. Do you buy a $4 latte every day? Here’s how to quit bad money habits.
Choose the right retirement account. Confused by your options? Here are the basics of IRAs, 401(k)s and more.
Set financial goals and hit them. Nail your retirement goals so you can rest easy and look forward to the years ahead.
Get rid of debt. You’re buried in it, here’s how to dig out.
Avoid costly money mistakes. Save thousands of dollars with these tips.
Lastly, ease up on social media for a while. If something makes you feel bad, you do less of it. Simple as that. If it’s a positive experience, then stay put, but keep an eye on your financial goals, too.
What’s your path to financial security? Share with us in comments below or on our Facebook page.