A Paradox: Optimistic millennials burdened by debt

BY RYAN P. MCMANUS

According to a recent Wells Fargo study on millennials’ (ages 22-32) attitudes toward savings and retirement, more than half of them say debt is their “biggest financial concern currently,” surpassing day-to-day expenses. Forty-two percent say their debt is “overwhelming,” double the rate of boomers.

Millennials talked about the barriers they faced when it came to saving money. For 87 percent of them, they literally didn’t have “enough money to start saving” and another 81 percent were focused on paying down their debt first.

Even with those barriers, 61 percent of millennials say they consider themselves to be “savers.” But the fact is, just about half have actually started to save for retirement. The other half are putting off saving for retirement until their 30s.

We believe that starting out young in a savings journey is crucial. For this generation, saving shouldn’t be an “either or” option. It’s crucial for millennials to both manage their debt today and start saving for the future. This is a way for them to apply their multitasking expertise to their finances.

Millennials who are disciplined at saving early, regularly and saving as much as possible can greatly benefit from the power of compounding. Ultimately, it may help them create a more confident financial future.

Skeptical of the Markets

About half of millennials say they aren’t very confident in investing in the stock market for retirement, but many are already in the stock market through an employer-sponsored plan. In fact, 72 percent who are saving says they are in a 401(k) plan. Perhaps these young adults have watched their parents lose big in the stock market, and this has created a lasting imprint, which is completely understandable. Still, we need to remind this generation that because they have time on their side, they are better positioned to ride out the highs and lows of the stock market.

Optimism Intact

Despite the debt burden and skepticism of the markets, millennials are confident in their ability to create the future they want. Almost three-fourths of millennials tell us they feel in control of their future and believe they can achieve their goals.

We’re hopeful that millennials will be able to thrive, despite the economic odds they may face when first entering the job market. It’s time for this generation to translate optimism into action by taking some basic steps to build a financial foundation.

Three Steps to Consider:

• Begin saving as you pay down debt. Set up an automatic deposit into your savings account so it builds up on a regular basis.

• Create a retirement road map, either online or with a financial advisor, to set clear goals for saving and spending in order to accumulate enough for your future. If you’re saving in an employer-sponsored retirement plan, consider setting annual automatic increases to ensure it remains a priority over time.

• Invest a small amount in the stock market to potentially give yourself a clear picture of how compounding returns help as you build finances for the long-term. PB

Ryan P. McManus Retirement relationship manager, Wells Fargo, Moorhead Ryan.mcmanus@wellsfargo.com

This article has been provided for informational purposes only and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Investing involves risk including the possible loss of principal. An investment in the stock market should be made with an understanding of the risks associated with common stocks, including market fluctuations. Asset allocation cannot eliminate the risk of fluctuating prices and uncertain returns. Since each person’s situation is different you should review your specific investment objectives, risk tolerance and liquidity needs with your financial professional before selecting a suitable savings or investment strategy.