Millennial Fiscal Conservatism

Saving-MoneyThe 70 Million Millennials (those ages 18-34) have lived through the stock market crash in 2008/2009 and have seen the angst of their parents just a few short years ago. They have lived through the precarious state of our economy and to some extent feel it even today as they seek employment. Many Millennials with college loans carry a heavy financial burden ($27,000+ on average) and many still live with ma and pa in their 20s and 30s. It’s no surprise if they are frugal. Many need to be.

Yet Millennials have the gift of time in their future financial planning and have the ability to drive savings and turn a penny into 7 cents

However many of those Millennials are still wise enough to sock away a small portion of their savings. In fact a recent study by the Transamerica Center for Retirement Studies indicated that 70% of Millennials are saving for retirement through employer plans or outside the workplace. On the other hand most are doing so in very conservative ways as they are wary of the stock market. Recent studies have shown that Millennials invest roughly 75% of their saving in bonds and cash, and only 25% in equities. While their concern about equities is understandable given the near collapse of the market last decade, their conservatism fights their opportunity to truly save for the future.

As they look to the future given the shift to greater individual responsibility in financial planning and increasing longevity, Millennials need financial planning far more than their parents and grandparents. Millennials can no longer count on pensions nor can they expect Social Security to continue unchanged. Their savings created in their youth well invested can yield a well funded future.

Millennial concerns are first and foremost are about debt and trying to secure good paying job. For many, college loans represent a burden that is an understandable barrier to savings. Furthermore, given the economic downturn and still high unemployment figures, they have not launched their careers as easily as previous generations.

After being rocked by the economy a few years ago, Millennials’ conservative approach to investing is a reasonable reaction. However, if they continue to be too conservative in their investment they won’t attain the financial goals they seek in later life, a life that will be far longer in years than previous generations. If they don’t have the confidence to trust in tomorrow, tomorrow might not be rosy.

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