Financial Wellness and Millennials: Hard Times Yield Important Lessons

We all know by now that millennials are different. Not different in a bad way, just different. So it is no surprise that when it comes to managing their personal finances, millennials are taking a different path than the generations before them. Until recently, Baby Boomers and older Gen Xers generally stuck to the straight and narrow and reaped good results: work hard, buy a home, invest in the stock market, and then retire on your pension, savings and Social Security. This worked well for most of their careers, as they rode a wave of stock and housing appreciation.

But millennials have good reason to question that approach. Having come of age during the Great Recession, many millennials entered their professional years saddled with burdensome student loans only to find a tight job market with disappearing pension plans, stagnant wages and continuing questions about the future of Social Security. To make matters worse, many millennials also watched as their parents' home values and retirement savings plummeted.

Unsurprisingly, these traumas have impacted millennials' attitudes about personal finances. PwC's recently released Employee Financial Wellness Survey illuminates many of the generational differences in attitudes about financial wellbeing by comparing millennials, Generation X and Baby Boomers. Here are some of the most important aspects of millennials' approach to their finances:

• Belt tighteners. Compared to the other generations we surveyed, millennials were particularly hard hit by the downturn. Higher savings and home equity among Gen X and Baby Boomers have translated to more immediate relief as stock and housing markets rise. By contrast, stagnant wages and job instability impact millennials disproportionately as they tend to be more income dependent. We find millennials trying to save more and reduce expenses; in fact, our survey results show they are more likely than older employees to be tracking spending, following a monthly budget and changing their spending behavior in order to save money on day-to-day necessities. Although millennials are doing better than last year, their relief appears delayed compared to older generations.
• Early worries about retirement savings. Against the backdrop of insufficient retirement savings, increasing life expectancies, and rising healthcare costs, people are on track to work longer. Millennials seem to get this: Nearly 80 percent of millennial employees think Social Security benefits will be either unavailable or reduced when they retire. In addition, as many as 57 percent of millennials would consider a partial retirement (working on a reduced schedule) if their employer offered one. As a result, they may be more in need of retirement planning assistance than the preceding generations.
• Financial stress about everyday expenses. Among the three generations surveyed, millennials are particularly concerned about both current and unexpected expenses. When asked about their top financial concerns, 61 percent of millennials listed not having enough emergency funds for unexpected expenses as one of their top two concerns, as compared to 43 percent of Baby Boomers and 52 percent of Gen X. Twenty-three percent of millennials mention not being able to meet monthly expenses as among their top two financial concerns as compared to 21 percent of Gen X and 13 percent of Baby Boomers.

This picture may look dark, but there are a couple silver linings, fortunately. First, things are improving for millennials. Although 35 percent of millennials find it difficult to meet monthly household expenses on time, that figure is down from 41 percent last year. Similarly, of the 52 percent of millennials who consistently carry credit card balances, only 30 percent find it difficult to make their minimum payments on time versus the 39 percent who did last year. And while a large proportion of millennials (52 percent) report financial stress, it is a decrease from 60 percent last year.

Second, these tough circumstances may ultimately benefit millennials. Their frugality, including their deployment of digital savvy to find the lowest prices and willingness to live at home longer, along with their tendency to push off major expenses like buying a home (only 46 percent of the full-time employed millennials surveyed own a home), getting married, and having kids, will likely serve them well financially as they age in an increasingly uncertain landscape for retirement and other benefits. As millennial Kelly Clarkson famously sings, "What doesn't kill you makes you stronger."