Two Surveys Find Kindred Spirits In Gen Y And Financial Planning

By Cyril Tuohy

InsuranceNewsNet

Hold on, now. Better check those recent headlines about Generation Y lagging in the financial planning department at the door.

It turns out that members of Gen Y – young adults roughly between that ages of 18 and 34 – are quite familiar with financial planning after all, and that they may be more familiar with planning than many people give them credit for.

Advisors who prefer to write off members of Gen Y until they have more assets may want to rethink their approach to a market that understands the importance of planning and preparation for the future, even if they don’t have much to invest today.

In fact, advisors and Gen Y are kindred spirits even if they don’t know it.

“While not quite putting money in the mattress, Gen Y definitely takes a more retro approach to how they handle their finances,” said Greg Oberland, executive vice president of Northwestern Mutual, which has just published its 2014 Planning and Progress Study.  “I’m guessing they’re making a lot of grandparents very proud.”

The Northwestern Mutual study found that only 14 percent of respondents said that when it comes to saving and investing, they are pursuing growth at all costs.

The study also found that Gen Yers are patient, and as many as 30 percent favor “slow and steady” as their financial planning approach.

Members of Gen Y also appear to be the most financially disciplined generation since their grandparents, perhaps even more so. The survey found that 62 percent said they are “highly disciplined” or “disciplined” financial planners, as compared to 54 percent for adults age 60 or older.

They’re also humble. Despite a focus on planning, 68 percent believe there is room for improvement in how they manage their money, the survey found.

In an interview with InsuranceNewsNet, Oberland said part of Gen Y’s comparatively fastidious planning habits could be due to young Americans having seen their parents and grandparents struggle in the wake of the 2008 financial crisis.

Members of Gen Y have read the articles about Social Security and government program entitlements possibly drying up before they will ever have a chance to benefit. As for private sector defined benefit plans, it’s doubtful that all but a handful of Gen Yers will benefit from those.

But even if government entitlement programs provide for them, members of Gen Y understand that they alone are responsible for their financial futures.

“They know something about planning,” Oberland said. “They are open to going deep into planning with someone and the value of having a disciplined plan. Advisors should not assume that this generation doesn't want to do planning or not save for the future.”

Conducted by Harris Poll, Northwestern Mutual’s survey queried 2,092 people 18 or older in between Jan. 21 and Feb. 5.

The findings in Northwestern Mutual’s 2014 Planning and Progress Study appear to have uncovered a truth about Gen Y and its members’ financial planning habits.

The survey conducted by Northwestern Mutual was backed up by separate research about Gen Y habits conducted by Principal Financial Group.

Principal Financial’s survey found that 94 percent of Gen Y workers believe saving for retirement is imperative, and that 65 percent began saving for retirement by age 25. In addition, the survey found that 80 percent of respondents had established a monthly budget and that 66 percent report having an emergency savings fund.

“We've started saving earlier than past generations and recognize we may need to work longer in order to meet our financial goals," Jase Johnson, voice of the young consumer senior business strategist for Principal Financial said in a news release.

Data for the Principal survey, conducted online between Sept. 9 to 18, was collected from 591 responses. The survey was sent to 15,000 workers.

Gen Y’s top three sources for financial advice are family, advisors and friends, the survey found. More than a third – 35 percent – of Gen Y workers have worked with a financial advisor, survey results also found.

About one in four workers who have not worked with an advisor said they are waiting for their retirement account to reach a certain balance or for a “life event” – a wedding or a birth – to occur before seeking advice, the survey also found.

The Principal survey also found that that $100,000 is the average retirement account balance that a Gen Y member would want saved before meeting with an advisor, and that on average a member of Gen Y would meet with an advisor after reaching the age of 39.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].