Gen Y's coming of age party was the Great Recession, so they don't trust banks for financial advice. Guess who they turn to.
It takes a village to raise a financially literate generation of millennials.
That’s what TIAA-CREF, a financial services organization, found when it surveyed 18-34-year-olds about whose money advice they listen to. The results: Gen Y is deeply distrustful of financial institutions, like banks, and instead relies on parents, extended family members, and spouses for financial advice far more than the general population.
Regardless of where they look for advice, you can’t mock their intentions. The study also found 72 percent are interested in learning to budget properly and 65 percent in saving for college, among other topics.
One possible explanation that millennials take such active interest in financial planning is that study after study says that today’s Social Security and pensions will not be available to millennials upon retirement. While the average age of today’s retirees is 62, according to Gallup, millennials will not be able to retire until 73. For a life expectancy of 84, that means millennials have 11 years to enjoy retirement.
It’s also a good bet that millennials are more wary of banks since the 2008 recession. Many watched as their parents and family members lost jobs, homes, and savings. It’s led them to shun investing, store their money in savings accounts that pay no interest, and use debit cards more often than credit cards.
Planning ahead more often
Many young people are using their parents’ experience as motivation to try carving out a more secure financial life. TIAA-CREF says that out of the 55- to 64-year-olds surveyed, only 57 percent feel optimistic about their finances. Millennials are learning earlier what their parents got the hard way, and those who do seek advice are more likely to have healthy finances. Gen Yers are…
- More likely to monitor their spending more frequently (75 percent vs. 63 percent of the population)
- More likely to change their spending habits (76 percent vs. 62 percent)
- More likely to increase their monthly savings (70 percent vs. 56 percent)
A personal touch
By now, it’s been written extensively that millennials are the first generation who literally grew up on the internet. That means, if they aren’t turning to their parents for advice, there’s a good chance they’re going online.
While 70 percent of millennials said parents and close family members are the ones they turn to most often for advice, 45 percent look to their employer, and 17 percent hopped on social media. It shows, as the study says, “they value personal relationships in dealing with financial issues.”
“Gen Y gives new meaning to the term connected,” said Kathie Andrade, executive vice president of TIAA-CREF. “It’s important for them to access financial advice via multiple platforms.”