By Chad Forsberg

bbt_perspectives_moving_millennial_feature

Step aside Baby Boomers (1946-1964). The Millennial generation (1980-2000), which is more than 80 million strong, has become the largest generation in the U.S. Given the youngest members of this generation are just teens, they are going to drive the economy of our nation for the foreseeable future. That’s why taking an interest in their financial health and preparing them for the future is in everyone’s best interest.

Millennials: Helping a New Generation Achieve Financial Success

Edge in Education

Certainly, Millennials have some advantages compared to previous generations. Most importantly, they are better educated. In fact, according to a New York Times article1, the percentage of 18- to 34-year-olds with bachelor’s degrees has increased from 15.7% in 1980 to 22.3% in 2009-2013, and those degrees make a difference.

A Pew Research Center study from February 20142 compared median annual earnings of full-time workers, ages 25 to 32, in 2012 dollars between different generations and education levels. In 1965, workers with a bachelor’s degree or higher earned $38,833, while high school graduates earned $31,384. By 2013, that difference had widened significantly. Workers with a bachelor’s degree or higher earned $45,500, while high school graduates earned $28,000. Note not only did the gap widen, but high school graduate earnings actually declined. The study also showed that college graduates have slimmer chances of unemployment and living in poverty, and higher percentages are married and live independently.

Degrees Come With Debt

No doubt, Millennials’ focus on gaining a college education will benefit them greatly. Yet, debt and managing finances are the challenges that face this generation like no other. Also mentioned in the New York Times article2, the proportion of bachelor’s degree recipients with college debt at graduation grew from 46% in 1993 to 71% in 2015.

Worse still, student debt correlates with a high degree of overall indebtedness. Millennial college graduates with college debt are more likely to have vehicle debt (43% vs. 27% for college educated without college debt) and credit card debt (60% vs. 39%). In fact, college-educated student debtors have a debt-to-income ratio of 205% versus college graduates without college debt at 108%, according to a Pew Research Center study3.

bbt-perspectives-moving-millennial-infographic-1

Need for Financial Literacy

So, even though Millennials are the best educated generation this country has ever seen, they do not have adequate financial knowledge to deal with their difficult financial circumstances. In the 2012 study of more than 5,500 respondents, ages 23 to 35, by PwC and George Washington University4, only 24% of Millennials demonstrated basic financial literacy. Other indicators of their need for better financial education from the study include:

  • In the past five years, 42% used alternative financial services such as payday loans, pawnshops, auto title loans, tax refund advances or rent-to-own products
  • Only 36% have a retirement account
  • More than 20% with retirement accounts took loans or hardship withdrawals in the past year
  • Only 27% sought professional financial advice on savings and investments within the past five years
  • Only 12% sought professional advice on debt management

While addressing skyrocketing college expenses and the future of Social Security will be important to this generation, as business leaders and employers there are actions we can take now to help Millennials improve their financial prospects.

bbt-perspectives-moving-millennial-infographic-3

Simple Steps to Improve Financial Health

First, all businesses have a relationship with a financial services provider — banks, insurance companies, retirement plan managers, accounting firms, employee benefits managers, etc. These firms have expertise and resources they can engage to help your Millennial employees.

Below are some key programs or service areas for you to consider:

Budgeting: The value of budget discipline is critical for Millennials who find themselves in debt and struggling to invest for retirement — and research shows they are willing make the effort. In June 2015, a T. Rowe Price study found 67% of Millennials will stick to a budget vs. 55% of Baby Boomers.

Employers would be wise to help educate their employees about the importance of budgeting, give them guidance on how to establish a budget and offer them tools to get started. A helpful tool is a household budget worksheet. Listing expenses and documenting where their cash goes is usually enlightening and will lead to insights about how to prioritize to pay down debt.

Financial Literacy: Understanding financial concepts for managing expenses, reducing indebtedness and saving for retirement are core to helping Millennials meet their lifestyle goals. Working with a provider to develop and deliver a financial literacy program for your employees can pay significant dividends. Millennials value businesses they feel they can trust and that understand them. Make sure literacy programs and tools are delivered in a variety of formats — face-to-face, email, applications, printed materials, WebEx, online, etc. Offering information in the way different employees like to consume it will build your credibility and encourage use and understanding.

Credit Management: Not all businesses and employers may be able to offer a holistic financial literacy program or advice. A more modest alternative may be to focus on credit counseling and retirement-planning advice. The statistics clearly show Millennials need help managing their credit, and yet only 12 percent — according to the PwC and George Washington University4 study — have sought professional help. Financial services providers will be eager to help your employees understand credit and what products or strategies might help them improve their debt situation.

Retirement Planning: Millennials have interest in planning for the future, and they benefit from tools that help and encourage them. A Vanguard study from October 20156 shows 18-34-year-olds with voluntary 401(k) enrollment participated at 60 percent, while those with automatic 401(k) enrollment participated at 87 percent. Clearly, automating the retirement savings process helps Millennials start saving for their retirement earlier.

Most businesses and employers are eager to help their employees because they feel a responsibility to them and want to see them succeed. They also realize that building a positive and supportive relationship with employees helps them attract and retain the best and brightest employees in the future. Recognizing that different employees, like Millennials, have different circumstances and needs — and taking the time to understand them and support them — will help fulfill that sense of responsibility and improve employees’ chances for a brighter future.

By Chad Forsberg

bbt_perspectives_moving_millennial_feature

Step aside Baby Boomers (1946-1964). The Millennial generation (1980-2000), which is more than 80 million strong, has become the largest generation in the U.S. Given the youngest members of this generation are just teens, they are going to drive the economy of our nation for the foreseeable future. That’s why taking an interest in their financial health and preparing them for the future is in everyone’s best interest.

Millennials: Helping a New Generation Achieve Financial Success

Edge in Education

Certainly, Millennials have some advantages compared to previous generations. Most importantly, they are better educated. In fact, according to a New York Times article1, the percentage of 18- to 34-year-olds with bachelor’s degrees has increased from 15.7% in 1980 to 22.3% in 2009-2013, and those degrees make a difference.

A Pew Research Center study from February 20142 compared median annual earnings of full-time workers, ages 25 to 32, in 2012 dollars between different generations and education levels. In 1965, workers with a bachelor’s degree or higher earned $38,833, while high school graduates earned $31,384. By 2013, that difference had widened significantly. Workers with a bachelor’s degree or higher earned $45,500, while high school graduates earned $28,000. Note not only did the gap widen, but high school graduate earnings actually declined.

The study also showed that college graduates have slimmer chances of unemployment and living in poverty, and higher percentages are married and live independently.

Degrees Come With Debt

No doubt, Millennials’ focus on gaining a college education will benefit them greatly. Yet, debt and managing finances are the challenges that face this generation like no other. Also mentioned in the New York Times article2, the proportion of bachelor’s degree recipients with college debt at graduation grew from 46% in 1993 to 71% in 2015.

Worse still, student debt correlates with a high degree of overall indebtedness. Millennial college graduates with college debt are more likely to have vehicle debt (43% vs. 27% for college educated without college debt) and credit card debt (60% vs. 39%). In fact, college-educated student debtors have a debt-to-income ratio of 205% versus college graduates without college debt at 108%, according to a Pew Research Center study3.

BBT-perspectives-moving-millennial-infographic-mobile-3

BBT-perspectives-moving-millennial-infographic-mobile-4

 

Need for Financial Literacy

So, even though Millennials are the best educated generation this country has ever seen, they do not have adequate financial knowledge to deal with their difficult financial circumstances. In the 2012 study of more than 5,500 respondents, ages 23 to 35, by PwC and George Washington University4, only 24% of Millennials demonstrated basic financial literacy. Other indicators of their need for better financial education from the study include:

  • In the past five years, 42% used alternative financial services such as payday loans, pawnshops, auto title loans, tax refund advances or rent-to-own products
  • Only 36% have a retirement account
  • More than 20% with retirement accounts took loans or hardship withdrawals in the past year
  • Only 27% sought professional financial advice on savings and investments within the past five years
  • Only 12% sought professional advice on debt management

While addressing skyrocketing college expenses and the future of Social Security will be important to this generation, as business leaders and employers there are actions we can take now to help Millennials improve their financial prospects.

BBT-perspectives-moving-millennial-infographic-mobile-1

BBT-perspectives-moving-millennial-infographic-mobile-2

Simple Steps to Improve Financial Health

First, all businesses have a relationship with a financial services provider — banks, insurance companies, retirement plan managers, accounting firms, employee benefits managers, etc. These firms have expertise and resources they can engage to help your Millennial employees.

Below are some key programs or service areas for you to consider:

Budgeting: The value of budget discipline is critical for Millennials who find themselves in debt and struggling to invest for retirement — and research shows they are willing make the effort. In June 2015, a T. Rowe Price study found 67% of Millennials will stick to a budget vs. 55% of Baby Boomers.

Employers would be wise to help educate their employees about the importance of budgeting, give them guidance on how to establish a budget and offer them tools to get started. A helpful tool is a household budget worksheet. Listing expenses and documenting where their cash goes is usually enlightening and will lead to insights about how to prioritize to pay down debt.

Financial Literacy: Understanding financial concepts for managing expenses, reducing indebtedness and saving for retirement are core to helping Millennials meet their lifestyle goals. Working with a provider to develop and deliver a financial literacy program for your employees can pay significant dividends. Millennials value businesses they feel they can trust and that understand them. Make sure literacy programs and tools are delivered in a variety of formats — face-to-face, email, applications, printed materials, WebEx, online, etc. Offering information in the way different employees like to consume it will build your credibility and encourage use and understanding.

Credit Management: Not all businesses and employers may be able to offer a holistic financial literacy program or advice. A more modest alternative may be to focus on credit counseling and retirement-planning advice. The statistics clearly show Millennials need help managing their credit, and yet only 12 percent — according to the PwC and George Washington University4 study — have sought professional help. Financial services providers will be eager to help your employees understand credit and what products or strategies might help them improve their debt situation.

Retirement Planning: Millennials have interest in planning for the future, and they benefit from tools that help and encourage them. A Vanguard study from October 20156 shows 18-34-year-olds with voluntary 401(k) enrollment participated at 60 percent, while those with automatic 401(k) enrollment participated at 87 percent. Clearly, automating the retirement savings process helps Millennials start saving for their retirement earlier.

Most businesses and employers are eager to help their employees because they feel a responsibility to them and want to see them succeed. They also realize that building a positive and supportive relationship with employees helps them attract and retain the best and brightest employees in the future. Recognizing that different employees, like Millennials, have different circumstances and needs — and taking the time to understand them and support them — will help fulfill that sense of responsibility and improve employees’ chances for a brighter future.

  1. Rattner, Steven. “We’re Making Life Too Hard for Millennials.” New York Times. July, 31, 2015.
  2. Caumont, Andrea. “Six Key Findings About Going to College.” Pew Research Center. Feb. 14, 2014.
  3. Fry, Richard, Parker, Kim and Rohal, Molly. “Young Adults, Student Debt and Economic Well-being.” Pew Research Center. May 14, 2014.
  4. Millennials and Financial Literacy – The Struggle with Personal Finance. PwC and George Washington University Global Financial Literacy Excellence Center. 2015. www.pwc.com.
  5. Retirement Saving & Spending Study. T. Rowe Price. June 2015.
  6. Young, Jean. The Auto Savings Generation: Steering Millennials to Better Retirement Outcomes. Vanguard Research. October 2015.

About the Author

Chad W. Forsberg, J.D., LL.M.

Chad W. Forsberg, J.D., LL.M.

Senior Vice President, Business and Financial Planning Strategist

Chad graduated from the University of Texas at Austin and earned his J.D. degree from Georgetown University and an LL.M. degree in taxation from Southern Methodist University. He is a member of the State Bar of Texas and the Dallas Estate Planning Council.