Millennials Make Spending Trade-offs but Save LessPaul RycorftAs people move through various life stages, their financial goals and priorities change. One thing that remains consistent for many is the challenge that comes with balancing long-term savings goals with short-term needs. Regardless of age or income level, people often make lifestyle choices that affect their immediate financial situation, which can have long-term effects. Millennials (those born after 1980), in particular, are in a unique situation when it comes to saving for the future. On one hand, time – and the power of compounding money and interest that comes with it – is on their side. On the other, they face unique spending and saving challenges. According to the Financial Trade-Offs study*, commissioned by Ameriprise Financial, Millennials are significantly more likely than both Boomers and Gen Xers to be consciously cutting back on discretionary expenses. This includes things like electronics (69 percent of Millennials say they’ve cut back on this compared to 57 percent of Gen Xers and 45 percent of Boomers) and car payments (32 percent of Millennials have scaled these back – more than any other generation surveyed). While Millennials are cutting back on spending, at the same time they’re failing to save diligently, creating an interesting paradox. Disconnect between spending cut-backs and saving The study found that younger Americans are likely to take on a large amount of debt while trying to balance saving for other financial goals. It appears as if the cash that they’re saving by making spending trade-offs may actually be helping pay down debt rather than grow their savings. Seventy-eight percent of those who have credit card or other miscellaneous debt say that it has made them feel stretched financially. Additionally, 76 percent feel that their car payments have been a stretch. The challenges that come from trying to pay down debt may be the reason that 59 percent of Millennials say they have a monthly savings plan compared to 75 percent of Boomers. Additionally, only 43 percent of Millennials with access to an employer-sponsored retirement plan are contributing enough to get the maximum employer match. And 69 percent have either reduced their contributions or say they would reduce their contributions in the future. Failing to systematically save and the long-term impact on financial goals There’s no denying that altering spending habits is challenging. Let’s face it, changing any habit can be difficult. But, more often than not, people find it beneficial. In this case, changing day-to-day spending habits can lead to extra cash, which may add up over time and make a big difference. Millennials looking to fund long-term financial goals should consider these steps.
### Paul F Rycroft CPA, is a Financial Advisor with Ameriprise Financial Services, Inc. in Alice, Texas. He specializes in fee-based financial planning and asset management strategies and has been in practice for 16years. To contact him please call 361.668.1212. Paul F Rycroft is located at 604 E. Second St. Alice, Texas 78332 Advisor is licensed/registered to do business with U.S. residents only in the states of Texas, Oklahoma, West Virginia, New Mexico. For further information and detail about the Financial Trade-Offs study including verification of data that may not be published as part of this report, please contact Ameriprise Financial. Ameriprise Financial Services, Inc. Member FINRA and SIPC. * The Financial Trade-Offs study was created by Ameriprise Financial utilizing survey responses from 3,002 employed Americans with access to an employer sponsored retirement plan (or with a spouse that has access to an employer sponsored plan) ages 25-67 who are primary financial decision makers or share in financial decisions in their household. All respondents ages 25 – 49 have investable assets of at least $25,000 while those over 50 have at least $250,000 (including employer retirement plans, but not real estate). The survey was commissioned by Ameriprise Financial, Inc. and conducted via online interviews by Koski Research from November 25 – December 16, 2013. | |
2014 Alice Business Today - April 2014 |