Young People Think They Have Good Financial Habits,
but Many Still Depend on Mom and Dad
November 20, 2014 -CHARLOTTE, N.C.–(BUSINESS WIRE)–Millennials are confident in their ability to manage their finances, but their actions tell a different story, according to the Bank of America/USA TODAY Better Money Habits Millennial Report, released today.
Even though a large majority (80 percent) of the 1,000 millennials ages 18-34 surveyed across the country believe they will be better off or the same as their parents and two-thirds say they have good financial habits, the report results indicate that many may have a less-than-ideal financial situation. In fact, 53 percent of millennials are living paycheck to paycheck and many are probably not preparing for the long term. For example, nearly as many millennials are saving for a house (32 percent) as are saving for a vacation (33 percent), 22 percent have yet to start saving at all and 35 percent still receive regular financial support from their parents or relatives.
“Many young adults have great confidence in their financial situations, but we can’t ignore the fact that so many are living day to day, not able to prepare for their financial future,” said Andrew Plepler, Global Corporate Social Responsibility executive, Bank of America. “We need to build on the enthusiasm we see from this group by providing the educational resources and tools they need to understand more about their money in order to achieve financial stability and help them reach their long-term financial goals.”
Millennials taking short-term actions, but may be delaying long-term goals
Seventy-four percent of millennials say they worry about their financial situation, and as a result, many are exhibiting good financial behavior to help them get on track in the short term. For example, nearly half (49 percent) pay off their credit card debt in full each month and 35 percent report only carrying cash to limit how much they spend.
However, these short-term actions may not be enough to help millennials secure their long-term financial objectives. In fact, only 31 percent of respondents said they are excellent/good at saving for retirement. Of those who save, only 16 percent have an IRA and one in three have contributed to a 401(k). At the same time, the report results indicate that millennials are finding it difficult to pay off their debts. Among the respondents with student debt, 48 percent say they are paying out less than $100 each month for student loans, which means that their debt will persist in the long term.
Consistent with the public’s overall perception of millennials, the report found that respondents have a hopeful, if not slightly idealist, view of their futures; only four in 10 believe that salary is more important than doing what you love.
Many still on the family payroll or living at home
The majority (57 percent) of millennials say it is “really difficult” for people their age to live within their means and not overspend, while 36 percent cited “spending more than I should” as one of their top causes of stress.
Many millennials are turning to their families for help; more than a third (35 percent) say they are receiving regular financial support from their parents or other family members, and one in five (19 percent) still live at home and are not paying rent or expenses. Further, 15 percent of millennials receive regular help from their parents for their rent or mortgage, and one in four (25 percent) get help with their cell phone bills from family members.
While seeking financial assistance from relatives a generation ago might have been seen as an embarrassment, it now appears to be par for the course. A staggering 80 percent of those who receive regular support say they know others their age who are receiving help from parents, and 55 percent of those who receive financial help say they discuss it openly and honestly with friends.
It’s not just the young, out-of-work millennials who are getting help from their parents or family members. Many respondents making more than $75,000 per year indicated they have received financial assistance as well: 25 percent of respondents in that category have received help at some point to pay for their groceries, and 21 percent have received money for clothing. Even married millennials are sending bills home: 11 percent of those who are married or with a partner still have mom or dad helping out with cell phone payments.
However, millennials who currently live with their parents don’t plan to stay home forever. Seventy-four percent of those who receive regular support say that they plan to stop taking financial assistance from their parents within the next four years.
Finding solutions: Better Money HabitsTM
For those who want a resource to help better understand personal finance topics from deciphering your paycheck to paying off student debt to buying a house, Bank of America and education innovator Khan Academy have partnered to help address this need. Together, they have developed BetterMoneyHabits.com, a free, objective education resource that pairs Khan Academy’s expertise in online learning with Bank of America’s financial expertise to provide content and tools for anyone, anywhere.
The site is designed with the key needs of the user in mind and includes content that specifically addresses topics most important to millennials. And, given this group’s inclination to turn online for all information, including financial education, the site provides simple, easy to understand content available on demand.
Whether it’s buying a car, building up savings or paying off a credit card – setting goals can help. In fact, the report shows that those who set goals seem to be good at reaching them; of the 41 percent of respondents who set savings goals, 65 percent said they normally achieve them. To support this, the site allows users to identify goals important to them, and recommends videos, articles and tools that give practical, actionable steps to take on a daily basis to help them get on track financially.
Additional report findings:
Savings shortcomings, student loan worries
- Thirty-seven percent of millennials have less than $5,000 in savings.
- Twenty-two percent have yet to start saving – this includes older millennials (aged 30-34), 18 percent of whom have not started saving.
- Of those who are both saving and employed, only 18 percent have an IRA, while 43 percent have contributed to a 401(k).
- Thirty-three percent have student loans.
- Of those with a student loan, only four in 10 receive help from parents or family with their payments.
Not all millennials are equal: A graduate vs. non-graduate divide
- Data indicated a major difference between older millennials (age 24 and over) with a college degree and those without the ability to manage their finances.
- Eighty-three percent of college graduates say they have good financial habits, compared to 56 percent of those without a degree.
- Seventy-three percent of those with a degree say they are currently financially independent, compared to 52 percent of those without.
- Two-thirds of college graduates say they are in good shape financially, while only 30 percent of non-college grads would agree.
The Peter Pan effect: A closer look at those still receiving help from their parents
- Not surprisingly, 37 percent of millennials in the 18-21 age range still live at home, but the numbers remain high for older millennials.
- Twenty-six percent of those aged 22-25 still live at home and don’t pay rent or expenses.
- Twelve percent of those aged 26-29 still live at home and don’t pay rent or expenses.
Millennial optimism delaying adult decisions
- Fifty-nine percent do not worry about doing more “adult” things, like buying a house or starting a family.
- Thirty-two percent say it would take earning $100,000 per year to make them feel successful.
- Many think having “made it” is being able to afford things like travel and treating friends and family (70 percent), vs. having their dream home (40 percent).
Many agree that parents prepared them to manage their finances – but they’re still dependent
- Sixty-eight percent say that their parents taught them about money.
- Fifty-eight percent say their money habits came from their parents.
- Forty-seven percent wish their parents had started talking to them about money sooner.
Ho, ho, humbug? Millennials may not feel the cheer this holiday season
- Seventy percent of millennials enjoy giving holiday gifts to their family and friends, but 45 percent worry about overspending on them.
- Fifty-three percent of respondents with a credit card worry about overspending.
- Thirty-three percent without a credit card say they worry about overspending.
About the Bank of America/USA TODAY Better Money Habits Millennial Report The Bank of America/USA TODAY Better Money Habits Millennial Report was conducted online among 1,001 adults during the period of October 9 – October 20, 2014 by GfK Public Affairs and Corporate Communication, using GfK’s KnowledgePanel®, a statistically representative sample source used to yield results that are projectable to the American population. To qualify, millennials had to be 18 to 34 years old. The margin of sampling error is +/- 3.5 percentage points at the 95 percent confidence level.
About Better Money Habits Bank of America has made a substantial commitment to address the need for better financial literacy by partnering with Khan Academy – a nonprofit with the mission of providing a free, world-class education for anyone, anywhere. Together, they’ve developed BetterMoneyHabits.com, a free, objective online financial resource that pairs Khan Academy’s expertise in online learning with the financial expertise of Bank of America. The customizable experience breaks down concepts and provides practical, actionable steps to strengthen the connection between financial knowledge and behavior.