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Millennials’ financial habits diverge from previous generations, according to research by BofA

  • A significant percentage of millennials seem to be less about paychecks and more about ethics.
  • Covid has shifted the way millennials think about spending and saving.

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Millennials’ financial habits diverge from previous generations, according to research by BofA

Gen Z may have taken some of the limelight as the newest generation coming into adulthood. 

But millennials may have another reason to get attention -- the Great Wealth Transfer is less than a decade away. 

By 2030, it’s predicted that millennials will inherit over $68 trillion from Baby Boomer relatives. 

And in terms of their attitudes towards money, millennials may differ from other generations. 

According to Bank of America’s research into the personal finance habits of affluent millennials, this generation is proving itself to be more open about their finances, more active in investing, and less interested in becoming big earners.

“We’ve got this really cool dynamic where there’s this generation that’s saying they want to think about the future more, and make sure that their work is meaningful,” said Matt Gellene, managing director of Bank of America/Merrill Lynch. “[They also want] better control over their financial lives, and that includes having a better understanding of where their finances are, and a much more proactive stance to their investing than they did prior to going into the pandemic.”

From present to future

Before the pandemic, instant gratification was one of the main pulls on millennials' spending behavior, including eating out and vacationing.

In light of the pandemic, though, there's been a significant shift in that regard. As a result of Covid's pressures, millennials have gone from instant gratifiers to retirement planners. 

86% of millennials said they're thinking more about saving for the future as a result of Covid-19's financial pressures. 

Within that number, 33% are putting more money into retirement.

According to Gellene, this attitude is significantly different from that of previous generations.

"The whole notion around wealth and money and the way that you think about where that fits in your life tended to be something that the other generations were less likely to either be conversant about or take an active interest in,” said Gellene. “Meanwhile, millennials are much more likely to be deeply involved and aware of money, personal finances, etc."

Financial behavior appears to be becoming an integral part of millennials’ identities as a result of the pandemic. Money is blending into different aspects of their lives, and this is regardless of whether or not they’re struggling financially.

 “[Money] ends up becoming a pretty consistent topic among themselves, their groups, their brands, etc,” said Gellene. “Most of them are changing their life plans due to financial concerns. Even if they already are in an affluent space, they're starting to shift their overall planning due to those concerns -- more so than the general population.”

Looking at careers differently

But while affluent millennials are putting more of a focus on money, it doesn't necessarily mean they're putting more of an emphasis on their paycheck.

50% of millennials are more likely to choose jobs based on work/life balance, compared to 39% of all other respondents. Likewise, 49% prioritize enjoying tasks a job requires rather than the salary it offers, compared to 34% of other respondents.

There’s also more of an entrepreneurial drive among millennials. 67% of millennials say they have plans to open their own businesses.

“Irrespective of whether they're working for themselves or working for someone else, they’re putting exceedingly high value on doing meaningful work versus something that pays extraordinarily well,” said Gellene.

Active investors compared to other generations and ESG proponents 

The study found that millennials appear to be more invested in their investments. 23% of millennials are more apt to manage their investments several times a day, compared to only 10% of the general population.

According to Gellene, the pandemic has led to millennials becoming much more proactive about their investments than they were prior.

As an additional tidbit, a Harris poll on behalf of CNBC found that a third of millennials take into account ESG factors when investing, compared to 2% of Baby Boomers, 16% of Gen Xers, and 19% of Gen Zers. That could point to millennials developing very specific criteria for their investments.

Opening up about money 

Millennials aren’t shy regarding money-focused discussions. 

85% feel comfortable talking about changing life plans because of financial concerns, versus 75% all national respondents. 77% don’t have a problem discussing salary, compared to 59% of all other respondents. Finally, 80% have no problem disclosing their bills and expenses -- 10% more than the other generations.

According to Gellene, the Covid-catalyzed cash candor could be connected to the information age that we’re in. With so much industry information available, and so many forums to discuss topics on, millennials have places to go with their questions about where to invest, how to save, and how they compare to others in these realms.

“There are so many more forums and opportunities for people to discuss financial management and financial wherewithal that just the ubiquitous of the of the platforms that are out there lend themselves to a higher degree of conversation,” said Gellene. “[and as we’ve found in] our 20/20 Report, they're definitely more likely than the other generation to have those conversations about their personal finances.”

How financial service providers are responding to millennials’ financial behaviors

Several financial service providers are starting to shape their business model into a more digestible format for millennials. 

On the fintech side of things, Robinhood’s initial appeal had to do with its targeting of first time investors, most of whom were millennials. The founders of the company themselves were born in the late eighties. 

Challenger banks like Current, meanwhile, are filling in the gaps where millennials feel they aren’t getting enough focus from traditional banks. Current, for instance, focuses on users who earn less than $45k a year. The digital bank has an average customer age of 27. 

But traditional banks aren’t letting millennial opportunities pass them by either.

Capital One for instance built its Capital One Cafes as a way to appeal to the millennial mindset more in terms of financial openness and education.

These spaces include coffee, food and free WiFi. There are also iPads available that allow millennials to take financial quizzes and lessons, as well as ‘Cafe Coaches’ -- financial experts that they can sit down with and ask questions.

“We had a digital bank, and we needed to connect with the communities that we serve," said Shaun Rowley, director of Capital One Cafés. “These cafés give customers a chance to come in, and experience our brand: see, touch and taste Capital One.”

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