The FINANCIAL -- Millennials’ financial views and habits have been most influenced by their parents, but the Great Recession has also had lasting impacts on how millennials think about money, according to a Bank of America/USA TODAY Better Money Habits Millennial Report released on April 21.
Eight in 10 millennials believe their attitudes toward money were influenced “a lot” or “some” by their parents, with four in 10 saying parents influenced them “a lot” – a stronger degree of influence than parents credit themselves (30 percent). Nearly three in five (58 percent) say their parents’ advice or example most influenced how they handle their finances today.
“Our research shows that parents remain the strongest influence on the money habits their children develop and practice as adults,” said Andrew Plepler, Global Corporate Social Responsibility executive, Bank of America. “The research suggests that millennials whose parents taught them the importance of wise money management and saving are better prepared to meet their financial needs later in life. That preparation is even more important in the context of changing economic conditions that can impact one’s financial situation.”
Saving early is most important lesson; millennials prioritize emergency saving over long-term goals
Save and save early: Parents and millennials agree that’s the most important piece of financial advice parents can give their children, and that lesson is resonating. Two-thirds of millennials (68 percent) have money set aside for savings.
In the aftermath of the Great Recession, the priority on saving for emergencies is top of mind for both millennials and their parents. Nearly half of all millennials (49 percent) say the economic downturn changed the way they think about saving, investing and spending, and more are currently saving for an emergency than for anything else. Likewise, 64 percent of parents say the downturn changed their financial behavior with one-third (32 percent) of those reporting that they are now saving more for a “rainy day” as a result.
Long-term savings challenges: After saving for an emergency (44 percent), there is a significant decline in the number of millennials saving for other longer-term goals, with only 20 percent who are saving for a car and 26 percent who are saving to buy a house. Slightly more positive is the number of millennials who are saving for retirement at 29 percent.
“It’s good to see that millennials are planning for the unexpected in the short term, but having a long-term view early can make a big difference down the road,” Plepler said. “While longer-term goals may seem far away, starting to save early is critical to meeting your future goals, whether saving for a car, buying a house or equally as important, saving for retirement.”
Student loan burdens: Nearly half of all millennial respondents who attended or are currently attending college (49 percent) have a student loan that they pay for, with an average payment of $201 per month. Of these, more than half (54 percent) say student loan payments have “a lot” or “some” impact on their ability to save.
Teachable moments stick with millennials
For millennials who say their parents did an “excellent” or “good” job teaching them about financial habits, 74 percent have savings and 48 percent make a monthly budget. On the opposite end of the spectrum, of millennials who say their parents did a “fair” or “poor” job, only 55 percent have savings and 37 percent make a monthly budget.
Parents used a number of different activities to teach their children lessons about money. Across the board, millennials who have savings are more likely to have said they experienced these “teachable moments.” The most effective actions associated with millennial savers include: opening a checking or savings account (70 percent), earning money for helping with chores (64 percent), saving for something they wanted (63 percent), saving money in a piggy bank (62 percent) and playing board games that involved money, such as Monopoly (54 percent).
Better Money Habits launches new content to help parents
Bank of America is launching new tools and resources for parents on BetterMoneyHabits.com, the free online financial education resource powered by Bank of America and education innovator Khan Academy. Inspired by Khan Academy’s modern approach to learning, the platform provides engaging and easy-to-understand content on a wide range of personal finance topics. The new Families and Money content is divided into topics appropriate for parents of elementary, middle and high school-aged children and includes issues such as establishing allowances, setting up money rules and introducing children to banking.
Parents see greater challenges for millennials; continue financial support into adulthood
Majorities of millennials and parents believe today’s young adults have struggled to find jobs and are still impacted by the economic downturn of 2008. A majority of parents (56 percent), more so than millennials (44 percent), also think young adults have it harder living within their means than parents did when they were young. Many millennials and parents think millennials’ financial hurdles – from buying a house to saving for retirement – are more difficult than those faced by the previous generation.
This perception of hardship could be why today’s parents are lending more financial support to their adult children than previous generations. Nearly two-thirds of millennials (65 percent) say their parents helped them out “a lot” or “some” when they were just starting out compared to 36 percent of parents who say they received financial help at the same stage in life. Nearly one-third (31 percent) who provide financial assistance do so because they believe their children truly “need” their help.
Overall, 40 percent of millennials currently receive financial help from parents, including more than one in five (22 percent) ages 30-34 and one in five who are married or living with a partner (20 percent).
Additional report findings:
Good comfort level on money conversations
Majorities of both parents and millennials say parent-child conversations about money matters are “not very/not at all difficult.”
Only a small number of millennials report that spending and budgeting (17 percent) and savings and investments for the future (16 percent) were “very” or “somewhat” difficult topics to discuss with their parents.
Almost half of millennials (44 percent) and parents (44 percent) report that millennials are still directly asking for financial advice at least somewhat often.
Large disparity on when money lessons should begin
Seventy-eight percent of millennials think financial conversations should begin before the teenage years.
Only 52 percent of parents began talking with their children about the importance of good financial habits before they were teenagers.
Parental double standard
Nearly one in five (18 percent) parents says they don’t follow the same financial advice they give to their children.
Student loan pressures inhibiting personal and career goals
Nearly half of those who are going/went to college or whose kids have gone to college (49 percent of both millennials and parents) noted their family has a student loan that the millennial pays.
Millennials with student loans pay on average $201 per month; parents who help their children with student loans pay on average $158 per month.
Among those who have a child who has gone to college, one in five parents (23 percent) pays for their child’s student loan; one in 10 parents (8 percent) have taken out an additional loan on top of student loans to pay for their child’s education.
Twenty percent of millennials with student loans have delayed starting a family because of their loan debt.
Twenty percent of millennials with student loans say their debt caused them to take a job they are overqualified for in order to make money.
Turning the tables on financial assistance
Forty-two percent of millennials believe they will need to support their parents “a lot” or “some” as they age.
Only 18 percent of parents think their millennial children will need to help them to the same degree.