Next time you are seated between a Baby Boomer and a Millennial ask them when they last reviewed their 401(k) statement. One will likely say “this morning” and the other will pause for a few seconds before replying “possibly last spring”. Which one is which?
The answer may surprise you: BlackRock’s 2014 Global Investor Pulse Survey
found that 56% of Millennials regularly monitor their investments, spending almost 7 hours a month reviewing the numbers. Compare this with 46% of Baby Boomers, spending a mere 2 hours a month on their investments.
While my hypothetical example may be a bit of an exaggeration, Millennials seem more engaged, optimistic and confident in their financial situation than other generations. In fact, 57% of them felt “in control” of their financial future, versus 41% of Baby Boomers. While this kind of optimism is easier for those who have decades before they retire and likely haven’t experienced some of life’s biggest milestones such as marriage, children or divorce, consider for a moment when most Millennials came of age.
Millennials are the ones who were in high school and college when their parents lost decades of retirement savings during the financial crisis. Today they are paying off student loans and watching their friends have difficulty finding work. They perceive pensions as a quaint anachronism and that cashing Social Security checks during their golden years isn’t likely. In short, they don’t believe in the myth of the retirement fairy.
An early read of this important generation is that they are forming good savings habits and following a routine of regularly monitoring their investments which will help pave the way for long-term financial success.
Among the lessons Baby Boomers can learn from Millennials:
1. Dedicating nearly half of one’s income to saving and investing. The Millennials surveyed said that they devote an average of 22% of their take-home pay to savings and 18% to investing. Boomers dedicate 12% and 11%, respectively.
2. Believing in the markets. 45% of Millennials have a greater interest in investing in stocks compared to five years ago, compared to 16% of Baby Boomers. Again, this is difficult for someone who watched their savings dissolve during the financial crisis to undertake. But as I mentioned in a previous post, a market dip is the best time to get in.