Paused Expenses Help Young Investors Focus on Savings, Finances – National Association of Plan Advisors

5%20MillennialsWith many expenses paused because of the pandemic, leading to increased savings, a new survey finds that many younger investors are more focused on their finances and the need for professional help. 

According to the latest New York Life Wealth Watch survey, 29% of Millennials reported having built a nest egg, saving an average of $4,241 due to paused costs such as deferred student loans, daycare and fewer daily expenses, such as coffee runs and eating out. 

These slowdowns in costs were the primary drivers of increased savings among younger generations, with 61% of Millennials experiencing pandemic-related paused expenses. Of this group, 48% of Millennials were able to save towards their financial goals over the past 18 months, compared to 45% of Baby Boomers and 41% of Gen Xers.

As a result of these paused expenses and savings, younger generations are more focused on their finances, with 58%of total respondents saying they are thinking about their finances more this year than last year. 

Across generations, the top three long-term financial goals were: 

  • building emergency funds (41%); 
  • paying off credit card debt (32%); and 
  • being on track to retire at their desired age (28%). 

Professional Guidance

Because of this focus on achieving financial goals in tandem with increased savings, a higher percentage of this younger cohort now report being open to guidance from a professional financial. In fact, more than half of Gen Zers and Millennials said their nest egg savings made them more likely to consider getting help from a financial professional (53% and 51%, respectively) compared with just 33% of all adults.

However, despite their newfound savings and willingness to work with a financial professional, most younger respondents lack confidence in knowing how to achieve their financial goals. When asked how best to describe their financial strategy, only 22% of Millennials said they “absolutely” know what they are doing and 41% said they “somewhat” know what they are doing, while only 13% of Gen Zers said they “absolutely” know and 37% said they “somewhat” know.

“One misconception about establishing a financial strategy is the notion that people need to have their finances ‘figured out’ in order to work with a financial professional,” notes Aaron Ball, Senior Vice President and head of Insurance Solutions, Service and Marketing at New York Life. “As Millennials and Gen Zers begin to reach financial and personal milestones, having the help of a trusted professional can help them feel more confident about their financial outlook, knowing they have an expert helping them adjust their financial priorities as expenses resume and the day-to-day routine may begin to shift.”

Additional findings from the survey include:

Confidence differs along generational lines for long-term planning and emergency preparedness:

  • Millennials are almost twice as confident as Gen Zers that their retirement savings will last the rest of their life (42% versus 23%).
  • Gen Xers and Gen Zers were most likely to say they felt less prepared than their peers for a financial emergency (45% and 44% versus 37% of all adults).
  • Men are more confident than women that their retirement savings will last the rest of their life (48% versus 33%).

Every generation has experienced some sort of savings because of paused expenses:

  • Respondents who experienced saving saved an average of $5,212 over the past year and a half.
  • Among those, Baby Boomers and Gen Xers fared better in saving over the past 18 months than younger generations, with Baby Boomers saving an average of $5,767 and Gen Xers saving an average of $6,076.
  • Millennials saved an average of just $284 more than Gen Zers, who averaged $3,957.

Americans are anticipating resumed costs such as mortgage and rent expenses, student loan payments and childcare expenses:

  • 19% of respondents are anticipating resumed or increased mortgage and rent costs, expecting to spend an average of $1,411 a month on rent and mortgage payments.
  • 11% of respondents are anticipating resumed or increased student loan costs, expecting to spend an average of $484 a month paying off student debt.
  • 18% of respondents are anticipating resumed increased childcare costs, expecting to spend an average of $764 a month on child care.

The latest Wealth Watch poll was conducted Sept. 10–14, 2021, among a national sample of 2,200 adults. It is a recurring survey that tracks Americans’ financial goals and their progress toward achieving those goals, identifying key trends on topics such as retirement planning, the role of protection-oriented solutions and the importance of financial guidance.