The popular press has a lot to say about Millennials—a loosely defined classification including those who are currently in their late teens to late thirties—and their money. We read that they’re broke, that they’re living with their parents out of necessity, that they’re drowning in student loan debt, and that they have less interest than previous generations in material wealth.
On an aggregate basis there’s some truth in some of those assertions. However, with approximately 75 million Millennials among us, it’s clear that no general trend will describe the entire generation. In addition, some of the conclusions drawn about millennial wealth management don’t hold up to scrutiny.
For example, some conflicting data includes:
- A Facebook study of users that concluded nearly half of millennial members of the social network fell into the “affluent” category, reflecting an annual household income of $75,000 or more
- A 2015 Navient survey in which more than 90% of Millennial respondents reported that they were saving money
It’s true that in the aggregate sense, Millennial priorities differ somewhat from prior generations. They’re waiting longer to buy homes, for example, and Pew Research recently projected that 25% of Millennials will never marry. But, the value this generation places on flexibility and freedom doesn’t mean its members don’t care about wealth management. To the contrary, financial security provides freedom.
In fact, in response to the 2016 Insurance Barometer survey by the LIMRA Secure Retirement Institute, a larger percentage of Millennials than any other generation expressed concern about:
- Having enough money for a comfortable retirement
- Supporting themselves if they were disabled and unable to work
- Burdening dependents if they died prematurely
- Burdening others with their funeral expenses
- Leaving an inheritance for their heirs
Millennial Wealth Management Strategies are Different
Wealth management has historically focused around asset growth and protection. As many Millennials wait longer to purchase homes (or never do so) and place a lower value on the accumulation of material goods, wealth management remains critical, but requires adaptation.
Unfortunately, despite the concerns listed above, Millennials as a group aren’t taking the steps that would allow them to build wealth for retirement, protect against disability, and ensure their legacies. For example:
- In response to the same survey cited above, 77% of Millennials said they would recommend owning a life insurance policy. However, only 51% actually carried such policies, and 24% said they didn’t have enough. Among those with life insurance, nearly half were covered only by group policies such as those offered by an employer.
- Similarly, more than half of Millennials say that finding themselves unable to work would have a “drastic” financial impact, yet only about 1/3 carry any amount of disability insurance.
- Despite the concerns cited about leaving a burden on dependents and others if they were to pass away prematurely, 78% of Millennials do not have wills.
Obstacles to Millennial Wealth Management and Asset Protection
One reason for the disconnect between the theoretical value Millennials place on protections such as life insurance and disability insurance and the likelihood that they are protected is cash flow. In the Insurance Barometer survey referenced above, Millennials were the most likely to report that paying current bills was their number one financial concern. In addition, Millennials are young—the top end of the generation hasn’t yet reached 40. Thus, many feel that they have plenty of time to implement long-term wealth management and asset protection strategies—even those as simple as life insurance.
Estate Planning for Millennials
The same deterrents discussed above can create perceived obstacles for Millennials when it comes to estate planning. However, the relatively small investment of time and money required to create an estate plan, write a will, provide for guardianship of children and attend to other matters that will protect your loved ones should you pass away prematurely is far outweighed by the benefits. This type of legal foundation, combined with relatively low-cost life insurance and disability coverage, can alleviate some of Millennials’ most commonly cited financial worries.