The youngest generation in the workforce, Millennials, have low rates of financial independence and confidence about their futures, according to a recent survey by Pittsburgh-based PNC Bank.
The first-time survey of Millennials (ages 20 to 29) was conducted online in July. The results show that only one-third of 28- and 29-year-old respondents described themselves as totally financially independent from others.
But that’s not for lack of trying. Sixty percent of those respondents who were not independent described themselves as “determined to be independent soon.”
About half of those aged 22 to 29 rated themselves as behind expectations in terms of personal financial success. In addition, about 20 percent of all those surveyed felt optimistic about their personal financial future, and nearly the same number were confident they will have enough money to live comfortably in retirement.
Only 28 percent of respondents relied on a full-time job to support themselves, while 57 percent relied on part-time jobs to earn money.
The low confidence among this youngest professional age group may be a result of entering the workforce during the Great Recession. While twenty-somethings often have low financial confidence, Millennials seem to be especially concerned.
“The Great Recession is playing a key role in the perception of not having financial success,” said a PNC spokesman.
That financial mindset could affect the investment habits of Millennials, who are also described as Generation Y (following Generation X) or Echo Boomers, since they are often the children of baby boomers and similarly take up a large chunk of the population. Most estimates pin Millennials as being born between 1981 and about 2000.
Members of the Millennial generation seem less willing to sacrifice now to save for later, and often are not educated enough about finances to feel financially confident, said Julie Ellenbecker-Lipsky, vice president of Ellenbecker Investment Group Inc. in Pewaukee. She works with about 500 area families on financial planning and investing.
But there is less financial confidence throughout the entire market following the recession, and that will take some time to recover, she said.
Ellenbecker-Lipsky has seen a number of Baby Boomer parents supporting adult children who are unable to find jobs or become financially independent.
“It is more difficult to become independent, especially when there’s less opportunity for employment,” she said. “It’s more difficult to get started (saving) when you don’t have anything and starting careers during a recession is an even bigger challenge.”
Many baby boomers have been professionally successful and can usually afford to have Millennial children move back home as they get on their feet, said Aleta Norris, a principal and co-founder of Brookfield-based Impact Consulting Group and Living as a Leader.
“As an organization, we started looking into the differing needs and preferences of the emerging workforce,” and how Millennials can be attracted and retained as employees, she said.
One insight she found: Millennials have a closer relationship with their parents than previous generations, which means they turn to them more often for financial advice.
“Actually as a result, our younger generations, our Millennials, are more savvy about money,” which could lead to a discomfort about financial prospects, Norris said.
Generation Y has different needs than its predecessors in Generation X and baby boomers, said Tim Sharko, chief executive officer of Badeslade LLC, a Lewis Center, Ohio-based company that analyzes millennial Generation consumer data for financial institutions and author of “Our Turn to Lead: How the Future of Personal Finance Will Be Shaped by the Millennials and the Financial Leaders Who Serve Them in New and Relevant Ways.”
The large generation was worth studying, since they will have a wide-ranging impact on the future economy, Sharko said.
“In 2010, over 42 million American Millennials, we’re talking 18 and over, had a financial value of $1.4 trillion,” he said. “Looking at the leadership ascent and the financial fitness of the Millennial generation is imperative for continued political, economic and moral leadership both here at home and abroad.”
Millennials have a more international business and social view than their domestic-focused boomer predecessors, he said. They’re also more interested in independent business and entrepreneurship, so they need more financial and business advisory services.
“(The PNC) study accurately reflects the immediate concern of Millennials, which is, ‘How do I launch and sustain a successful career?'” Sharko said.
Members of the Millennial generation are expected to have more career changes and need more funding for career training and additional degrees than previous generations. All of these differences have a personal finance implication, particularly on investment and planning, Sharko said.
For the Millennial generation, coming into adulthood during the Great Recession has also delayed homeownership, said Mike Ruzicka, president of the Greater Milwaukee Association of Realtors.
“(Millennials) do have a little less confidence in the market overall, just because of what’s happened in the last five years,” Ruzicka said. “We’re creating pent up demand because they’re not getting in the market to where in a normal market they would.”
Since financing remains more difficult for borrowers to obtain, fewer young homebuyers are entering the housing market. And with baby boomers unable to sell their homes and move out of their empty nests, there’s a stalled chain of home buying, Ruzicka said.
“Things are loosening up a little bit but it’s nothing like it should be,” he said.
Younger buyers need to realize the market won’t get back to pre-recession levels for a long time and adjust their expectations accordingly, Ruzicka said. They can expect a lower appreciation, at about 5 to 7 percent, over a longer time period of about five years.
“I think they need to take a little bit longer term perspective in how long they want to own (the home),” Ruzicka said.
Jennifer Burns, a sales executive with Realty Executives-Integrity in Hartland, often works with first-time homebuyers in the Millennial generation and has seen many of them with low financial confidence.
“A lot of people just assume they can’t get mortgages,” Burns said. “There’s maybe more of them out there that could purchase, but I think they’re not always sure about it.”
It’s important to think about one’s financial future at a young age, but Millennials shouldn’t beat themselves up about not meeting monetary expectations, said Paul Sfanos, PNC area manager and senior vice president for the Wisconsin market.
“For the Millennials, it’s really important not to panic,” he said. “Time is truly on their side.”
He recommended a “pay yourself first” philosophy when it comes to distributing a paycheck by establishing a regular savings program such as a 401(k) retirement plan.
Sfanos also advised creating a budget using an online money management program and avoiding high interest rates that can become debt traps.
