Millennials Should Fear Their Financial Future

Millennials are better prepared for their financial future than any other generation, which gives them all the more reason to be nervous.

According a survey by investment firm Franklin Templeton, all generations are nearly as concerned short-term market volatility (47%) as they are about not achieving their long-term retirement investment goals (53%). Millennials (ages 18-36) are particularly preoccupied with short-term risks (47%), more so than Generation X (37-52, 39%). Additionally, Millennials with more than $100,000 in retirement savings were even more anxious about short-term volatility (76%) than the other generational groups.

While they're fairly confident that they'll achieve their retirement goals (47% of all Millennials and 86% of those making $100,000 or more), they remember their parents struggle through the housing crisis and their own difficulties with employment during the recession. The folks at Franklin Templeton consider this "present bias" equivalent to buying lattes, the lazy "$5 lattes are stealing from your retirement" argument continues to ignore the fact that Millennials have other financial priorities right now.

The Bank of Montreal's wealth management group notes that Millennials are typically very conservative with their savings. While 25% of those surveyed by BMO said they are worried about their ability to ever afford to retire, only 10% say retirement is their top priority. Some 37% indicated that retirement is simply too far off and that they have more immediate priorities. Considering that most Millennial college graduates left school with an average of $35,000 in debt or more, according to student loan site Cappex, it isn't surprising that 25% would rather pay down debt, 17% would like to find a job that pays better and 15% would like to buy a home.

Most Millennials favor a savings account (42%) when they sock money away, compared to an IRA or 401(k) (13%) or Roth IRA (6%). Naturally, this doesn't sit well with the folks trying to get them into these products.

"IRAs, Roth IRAs and 401(k)s are some of the best plans for helping Millennials save for major purchases, such as buying a home or saving for retirement," says Stephen Williams, senior vice president of wealth Planning, BMO Wealth Management (U.S.). "Contributions to these accounts grow tax-free or tax-deferred and savings can significantly accumulate over time. I cannot stress enough to Millennials the value of utilizing these accounts for retirement planning and also for other means."

Though the folks at BMO worry about Millennials' financial literacy, even BMO's own report indicates they're giving their finances serious thought. Roughly 65% of those surveyed says their current financial situation concerns them more than their relationship, job or anything else. Meanwhile, according to a survey by RBC Wealth Management, 80% of Millennials say they feel responsible for understanding their own financial affairs, while 69% reported they conduct their own financial research. That latter point is especially noteworthy, as just 61% of Generation X, and 47% of Baby Boomers (over 52), reported they do the same. It helps that Millennials began their formal education on financial issues around age 20, while Gen-Xers said they started learning around age 25, and Baby boomers around age 32.

"Millennials are more educated than previous generations, with more attending college than their parents and grandparents," said Angie O'Leary, head of Wealth Planning at RBC Wealth Management-U.S. "They're a more mindful generation with a global perspective, all of which has factored into their sense of responsibility about finances."

Being fully aware of their financial state rightly leaves Millennials a bit unsettled. According to a report from Merrill Lynch, Millennial employees (67%) are more than twice as likely as Baby Boomers (32%) to report that financial stress interferes with their ability to focus and be productive at work. While 43% of employees spend an average of three or more working hours per week on personal finances, and 21% spend five hours or more, Millennials dedicate four hours of their work week to personal finances. That's double the amount of time dedicated by Gen Xers and four times that of Baby Boomers.

Though nearly three-in-five employees even say financial stress has a negative effect on their physical health, a whopping 68% of Millennials say it's taking a toll -- compared to just 51% of Baby Boomers). Because society has branded them as entitled freeloaders, to a survey by Bankrate.com indicates that Millennials think people should be able to pay for their own housing at age 22, for their own car at 20.5 and for their own cell phone at 18.5. In all three cases, Millennials' average response is about a year and a half earlier than Baby Boomers feel is appropriate.

"Millennials are often stereotyped as being entitled," said Sarah Berger, The Cashlorette at Bankrate.com. "It's refreshing to see that Millennials really do have high expectations of gaining financial independence and getting off their parents' payroll."

In fact, 53% of Millennials told RBC that they intend to provide a greater level of support to their beneficiaries than they received. That includes some of the 51% received guidance from other family members on wealth transfer. As a result, 35% have drafted a will, while 64% have taken the first steps in their retirement and estate planning.

"Regardless of their level of preparation, Millennials are learning about finances earlier, and that's a positive trend," O'Leary said. "As long as they're thinking about the basics of financial literacy, such as budgeting, investing and saving for retirement, they'll be off to a great start."

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