26th September 2016 at 2:00pm
When it comes to the art of budgeting and making the most of the money you have, who’s the best?
According to a recent report it’s the millennials that rule the roost and the baby boomers that could learn a thing or two from their example.
Don’t believe the hype
Even though they may get some bad press when it comes to their lifestyles and spending habits, it would appear the millennials have a rather good grasp on the purse strings after all.
A survey, which compared the saving and spending habits of 1,038 boomers and 1,062 millennials, uncovered the surprising news that 8 in 10 millennials have a budget, compared with 61% of boomers, and the younger respondents were also more likely to be following their budget some, most, or all of the time.
“Millennials are doing something fantastic when it comes to budgeting,” said Matt Sadowsky, director of retirement for TD Ameritrade, the company that compiled the savings survey.
Millennials are doing something fantastic when it comes to budgeting
So what is it the younger generation are doing right? And what could we learn from their example?
Adopting smart budgeting techniques
Although millennials may not have much to put aside, they cut their cloth to match.
Compared with boomers, millennials are more likely to be saving for a goal other than retirement, more likely to have pulled together a savings plan for their financial goals, and more likely to set realistic savings targets.
The millennial has an advantage over previous generations of savers in the shape of digital technology – their familiarity with it and their willingness to use it plays a large part in their budgeting success. Millennials are ten times more likely than the older generation to use an app to track purchases and monitor spending patterns, the survey found.
A key learning
While drafting a workable budget is an important step, technology can make it easier to stay on track.
There are apps that offer everything from personalised budgets to custom savings goals and sophisticated ways to track your daily expenses. There are even investment apps that can put your spare change to good use. A nice example is the American app Acorns, which automatically invests your change left over from purchases into your chosen investment fund.
For more info on some handy saving and budgeting apps it’s worth checking out our blog ‘Mobile apps – a smart way to manage your finances’ where we’ve listed a few of the best.
And it would seem millennials are surprisingly more willing to seek out advice when it comes to the big decisions than their older counterparts. Even though they have such affinity with the internet, and you’d expect then to surf for what they needed, the research showed they are more likely to opt for professional financial advice.
Millennials more willing to seek financial advice for big decisions
When faced with eight hypothetical situations which included receiving an inheritance, buying a home and planning for retirement, younger respondents were more likely to ask for help in the shape of professional financial advice. Perhaps having witnessed large-scale financial meltdowns and their repercussions, the millennial is less likely to gamble with their finances and seek professional help on big decisions.
A key learning
Financial life is getting more complex. The products are more complicated and there are more decisions to make. If you’re in doubt it’s always worth seeking out some guidance.
Financial life is getting more complex
Statistics show there’s real monetary value in taking professional advice too. Research conducted by unbiased.co.uk found that UK savers who take advice save on average £98 more every month and receive an additional income of £3,654 every year of their retirement.
Being flexible about retirement
When it came to setting an age to retire, the younger generation had a much more flexible approach; only 36% set age as a milestone versus 52% of boomers. The millennials were more likely to base the time to retire on a monetary figure. They were also quite prepared to retire later to make sure their money lasted longer. They understand that their money could need to last them a significant length of time given rising life expectancy.
A key learning
When it comes to retirement you need to be realistic, don’t just pin an age to it, pin a lifestyle on it.
Taking a steer from the millennials by picturing your perfect retirement and looking at it from a monetary perspective, you may get a truer picture of what you need to do to achieve it and when you might be ready.
And remember, the bell doesn’t need to ring at 55, as each additional day in the workforce can give your savings more opportunity to grow. With life expectancy on the rise, there’s every chance your life after work could exceed 30 years, so remember to always factor that into your plans.
Each additional day working could give your savings a chance to grow
Coming up with that magic number can be tricky, for some tips on how to work out the figure you might need, our article Retirement Savings – What’s the ‘Magic Number’? could help.
A positive start
The news that the younger generation are looking at their current and future finances in such a positive way, bodes well. It shows these young savers are displaying a real level of maturity when it comes to their savings and employing some clever techniques we can all learn from.
The information in this blog or any response to comments should not be regarded as financial advice.