Millennials are maturing in some surprising ways. Their work ethic is stronger than most believe. They are more aware of what it takes to build a nest egg than other generations, and they’ve done a decent job getting diversified.
But the Facebook generation is taking too many wrong financial cues from one another, a new survey shows. Three in four 25-to-34 year olds (a group that includes older Millennials and younger Gen X members) look first to their peers for money guidance, according to the survey from the American Institute of CPAs and the Ad Council. To get young people’s attention, the Ad Council and financial website Feed the Pig just released a series of humorous public service advertisements about saving.
Millennials came of age during a time of financial crisis, bank failures, and a personal bankruptcy and foreclosure boom. One result is a deep lack of trust in financial institutions. So it’s no shock that the group leans on social media for guidance about money, as it does for everything from what movies to see to what news to follow.
Two in three wants to keep pace with peers on where they live and what they wear, and the types of places they eat and the gadgets they carry. But Millennials aren’t just trying to keep up with the Joneses; in many cases they are willing to sink to peer levels even though they may have greater ability to, say, save for retirement or retire student debt.
Peers have never been a great source of financial information for any generation, and along with those surprising positives noted above this one also has some serious flaws. According to the AICPA:
- 61% of 25-to-34 year-olds need family money to make ends meet, and more than half say the need will persist for at least another year; 8% say it will persist at least another five years.
- 45% use a credit card for necessities, and 70% define financial stability as being able to pay all bills on time.
- A bill collector has contacted 28% in the last 12 months.
- 24% have missed a credit card or other debt payment in the last 12 months.
“As the saying goes: Be careful about the company you keep,” Ernie Almonte, chair of the AICPA National Financial Literacy Commission, says in a release. “Many young adults are building financial foundations with the wrong blueprints.”
This is an age group that must begin saving now. The social safety net is fraying; pension and Social Security benefits are eroding. The one advantage that young people enjoy is time—40 years to earn, save and let their investments compound. An extra 10 years of growth can be the difference between a $1 million and a $2 million nest egg at age 70.
If they are taking their cues from peers who never miss an iPhone upgrade but have boomeranged home with Mom and Dad, they are headed the wrong direction.