The money habits of millennials show the generation could be in a better financial position than elder groups, according to the “Generations Ahead Study” from Allianz Life Insurance Company. According to the report, 77 percent of millennials feel financially confident, while only 64% of Gen Xers reported the same.
Despite that confidence, social media is stunting millennial financial growth. Eighty-eight percent of respondents in the survey said they believe social media creates more of a tendency to compare their lifestyles and wealth to those of others. Fifty-seven percent said they spend money they hadn’t planned to because of what they saw on social media, according to the report.
“Millennials are more immersed in social media than past generations,” said Paul Kelash, vice president of communication and consumer insights at Allianz Life, speaking to Financial Advisor. And millennials could be swayed more than other cohorts by social media and the temptation to spend beyond their means. That could hurt them over the long term if they aren’t careful, Kelash said.
“Understanding the full effects of social media on millennials is a key consideration for financial advisors when working with and developing plans for millennials,” Kelash said.
Social media influenced emotional spending in the millennial group. Fifty-five percent reported experiencing the fear of missing out (FOMO) and 61 percent felt inadequate about their own lives and what they have because of social media, according to the report. As a result, the study showed about half are currently spending more money on going out than on rent or mortgages.
“While every generation has experienced a need to ‘keep up with the Joneses,’” Kelash said, “social media seems to have helped take it to a new level for millennials. [They] are barraged with information and updates on what their friends are doing to such an extent that it makes it very difficult for them to tune it all out.”
Millennials continue to lead the pack when it comes to planning for their financial future. Fifty-eight percent prioritize saving for retirement as a basic necessity, like food or housing. Seventy-one percent of millennials reported using what the study categorized as “tricks” to set aside money for specific savings goals.
“Millennials are finding innovative ways to build their financial strength and are becoming more confident because of these actions,” said Kelash.
Millennials reported a median retirement savings amount of $35,000, equal to that of Gen Xers, who have less time to save. Even better, 48 percent of millennials with a 401(k) reported they contribute 10 percent of their income or more each month—the highest reported percentage of all generations (only 36 percent of Gen Xers and 44 percent of baby boomers contributed that much). Forty-one percent of millennials said they always set aside money each month for their savings.
“The most significant finding was the dichotomy between millennials’ ability to be successful in financial planning yet so vulnerable to social media and spending beyond their means,” Kelash said. “Sixty-three percent of millennials consider themselves a spender, while 51 percent of Gen Xers are spenders and 36 percent of boomers are spenders.”