LONDON—A new study reveals what may be a surprise to many: Millennials are better savers than their parents, and Gen Yers with parents who have had a positive financial influence on them do even better.
Findings from Experian’s Millennial Me & My Money report show that 45% of Millennials manage to save at least a quarter of their disposable income each month, compared to just a third (34%) of 35-55-year-olds.
Not only that, but Millennials who believe their parents have had a positive influence on their money habits have almost double the savings of those who say their parents had a negative influence.
“Likewise, those who have benefitted from their parents’ financial experiences are savvier when it comes to managing credit,” Experian explained. “This is likely to stand them in good stead for the future; helping them access better rates on borrowing which could save them a considerable amount of money when it comes to big purchases later in life.”
The research shows that Millennials who say their parents have had a negative influence on their money management are:
- More than twice as likely to have missed an agreed credit repayment (17% vs. 7%)
- More likely to have gone into an unplanned overdraft (33% vs. 19%)
- Twice as likely to have run out of money before payday in the past (44% vs. 21%)
- Twice as likely to have been refused credit (20% vs. 10%)
- More than twice as likely to have defaulted on a credit account (10% vs. 4%)
- Five times more likely to have a county court judgment in their name (5% vs. 1%)
“It’s striking to see just how much of an impact parental influence can have on the financial wellbeing of Millennials in adulthood,” said Clive Lawson, managing director at Experian. “What this research made clear to me was the opportunity that we as parents have to set foundations by helping our children learn from both our experiences and our mistakes in managing money, and enjoy the advantages that might bring them later in life.
“As it stands, it appears that Millennials already surpass older generations when it comes to money management and this is good to see,” continued Lawson. “However, there are still a few lessons to be learned. Many are still making crucial errors in the way the manage credit and these mistakes, such as not even checking their own credit report can have far-reaching effects on their financial future. There was also a surprising apathy shown towards seeking value by shopping around, which was is consistent with older generations.”
Highlights from the report:
Nature vs. Nurture:
- 80% of Millennials say they have received no formal financial education
- 25% consider themselves to be “spenders”; 49% consider themselves to be “savers”
- 67% say their parents or guardians have had a positive influence on their money management habits; 17% say their parents have had a negative influence
Millennials as Consumers:
- 30% save either a quarter or half of their disposable income each month
- Millennials are most likely to spend what remains of their disposable income on eating out (54%), socializing (51%), clothes and fashion (35%)
Common Financial Pitfalls:
- 46% of Millennials have never checked their credit report
- 25% have run out of money before payday in the past
- 21% have gone into an unplanned overdraft
- 13% have had their card declined without realizing they were out of money
The Role of Technology:
- 45% of Millennials online say technology plays an important role in the management of their finances; 46% say it doesn’t
- 56% use online banking (through a website) as their preferred method of managing their money; 25% use mobile banking (through an app); 9% still favor face-to-face in-branch banking; 1% opt for telephone banking
Value-Seeking Behaviors:
- 56% say they would be willing to switch to a different service provider that offered them something extra; however, a quarter (23%) say they are not willing to switch
- Millennials would be encouraged to switch if an alternative provider offered cheaper services (47%); better products/ services (46%) and cash incentives (44%) or rewards and privileges (37%)
- Detractors from switching, even if a new provider could save them money, include poor reputation for customer service (51%); thinking it’s too much effort (47%); if there isn’t enough of a difference in the product/service provided (46%); and worries that there would be disruption during the switching process (39%)