Dive Brief:
- The results of a research study found that millennials making minor changes in their personal finance strategy can increase lifetime retirement savings by as much as 12%.
- The 2016 Generational Research study, from Financial Finesse, reports that younger workers who have an emergency fund in place, track expenses and pay down some credit card debt also tend to boost their average retirement plan contribution rate.
- Among other key findings, baby boomers (55 or older) had an average financial wellness score of 5.7 (out of 6.0), showing personal financial skills, though financial planning gaps remained. Bottom line, all generations in the study face increased debt payment challenges, including the risk of becoming over-leveraged should the U.S. economy undergo another serious recession.
Dive Insight:
Liz Davidson, founder and CEO of Financial Finesse, says the research confirms the critical role that workplace financial coaching programs can play in helping employees avoid valuing short-term benefits over future satisfaction,
Baby boomers, who are already facing challenges saving enough to retire, are particularly vulnerable in this respect, as they had the biggest decrease in the percentage of workers who have a plan to pay off their debt (64% to 58%) and the biggest increase in those that are experiencing late fees (11% to 15%). On the other hand, boomers are most likely to have run a retirement calculator (50%) and have basic investment knowledge (78%). Generation X is the only generation to have a significant increase in the percentage knowing they are on track for retirement (22%, up from 20% in 2014).
Employers need to help millennials understand that with small changes, they can avoid the fate of earlier generations. Signs are good, as millennials are showing financial savvy at a young age. Many are keeping on top of their credit report annually (61%) and utilizing Roth savings accounts (36%).
On the positive side, Davidson notes that across the board, employees of different generations are "running their numbers" to calculate where they are currently with key financial goals, and are beginning to understand what changes they need to make to their money management, savings and investing strategies to reach these goals.