MONEY Personal Finance

Turns Out (Gasp) Millennials Do Want to Own Cars

150119_EM_MillennialMyth
Jamie Grill—Getty Images

Young adults want to share everything--except maybe their car

Millennials have spurred the rise of the sharing economy by embracing the notion that renting is almost always better than buying. But even they want to own their own set of wheels, new research shows. Could homeownership, a diamond ring and other traditional purchases be far behind?

Some 71% of young adults would rather buy a car than lease one and 43% are likely to purchase a vehicle in the next five years, according to a survey from Elite Daily, a social site, and research consultants Millennial Branding. This finding suggests young adults that have popularized car-sharing options like Zipcar and RelayRides—and all sorts of other sharing options from wedding dresses to leftover meals—may be warming to traditional ownership.

Could it be that the kids are growing up and want something of their own? Other research shows that millennials, widely regarded as an idealist generation that favors flexibility and personal fulfillment over wealth, have begun backtracking there as well. Increasingly, they link financial health to life satisfaction.

For now, though, home ownership remains largely off their radar: 59% would rather rent a house than buy one and only one in four millennials are likely to purchase a house in the next five years, the survey found. “This shows that millennials don’t know anything about investing, even though they say they do,” says Dan Schawbel, managing partner at Millennial Branding. “A home is a much better investment than a car.”

Schawbel believes millennials are more eager to buy cars because they are delaying marriage and children, and they don’t want to be tied down with real estate. Plenty of research supports that view—and the trend toward delayed family formation. Yet it seems only a matter of time before this generation embraces marriage and homeownership too. The oldest are just 35 and, the survey found, three in five can’t afford to buy a home anyway.

The survey also found that millennials might be struggling less with student debt than is widely believed. Yes, student debt now tops $1.3 trillion. But young adults have money to spend. They are using their income to pay off their loans and getting support from their parents to pay for other things, Schawbel says. That may mean a car now or in the near future, and it seems increasingly clear that eventually it will include real estate. This generation is carving its own path, for sure. But the path may wind up looking more traditional than they know.

MONEY 401(k)s

Why Your Employer May Be Your Best Financial Adviser

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Thomas Barwick—Getty Images

Employers are offering more than 401(k) advice. They are adding financial wellness programs that help workers budget, save for a home, and more.

Large employers are taking on the roles of retirement adviser and financial educator in increasing numbers, new research shows. This is welcome news, because the federal government and our schools have not done a great job on this front, and individuals generally have not been able to manage well on their own.

Employers have been tiptoeing into retirement planning for workers for years as part of their 401(k) plan benefits. Typically, the advice has been offered in the form of printed materials and online informational websites. More recently, personalized advice has become available through call-in services and, in some cases, face-to-face meetings with planners arranged through work.

But what started as help with, say, settling on a contribution rate and choosing appropriate investment options has evolved into a more rounded service that may offer lessons in how to budget and save for college or a home. A breathtaking 93% of employers intend to beef up their efforts at helping workers achieve overall financial wellness in a way that goes beyond retirement issues, according to an Aon Hewitt survey.

This effort promises to fill a deep void. Just five states require a stand-alone personal finance course in high school, and just 13 require money management instruction as part of some other class. Meanwhile, the Social Security and pension safety net continues to grow threadbare. Someone has to take charge of our crisis in financial know-how.

Employers don’t relish this role. It comes with lots of questions about fiduciary duty and liabilities related to the advice that is proffered. Yet legal obstacles are slowly being cleared away to encourage more employer involvement, which is coming in part out of self interest. Financially fit workers are more productive and more engaged, research shows.

A company that offers a financial wellness benefit could save $3 for every $1 they spend on their programs, according to a Consumer Financial Protection Bureau report. These programs also reduce absenteeism and worker disability costs. That’s because money problems may cause stress that leads to ill health. So helping employees improve not just their retirement plan but their entire financial picture makes sense.

Among the upgrades most popular with employers, Aon found:

  • 69% offer online investment guidance, up from 56% last year, and 18% of the rest are very likely to add this feature in 2015.
  • 53% offer phone access to financial advisers, up from 35% last year.
  • 49% offer third-party investment advice, up from 44% last year.

Aon also found that 34% of employers have cut their 401(k) plan’s administrative and other costs, compared with just 27% a year ago. This echoes a BrightScope study, which found that employers generally are beefing up investment options while reducing fees in their 401(k) plans. In all, it seems employers are embracing their role as financial big brother—for their own good as well as the good of their workers.

MONEY Millennials

Millennials Increasingly Link Money With Fulfillment

money jigsaw puzzle
VisualField—Getty Images

Focused on purpose and meaning, millennials nonetheless wind up more satisfied when their finances are in order, a new study suggests.

Millennials define success more broadly than older generations, seeing it as less about wealth and more about a healthy and fulfilling life. But even as this generation tries to change the world through jobs and investments with purpose, among other things, it may be finding that financial success and personal satisfaction often go hand in hand.

Millennials who describe themselves as successful—whatever that may mean to them as individuals—report more healthy finances across the board than those who do not, new research shows. For example, 31% of millennials who say they are satisfied with their current lifestyle report annual income over $75,000, while just 24% of all millennials earn that much.

Might their healthier income be part of the reason? That seems likely, based on a broad range of findings in a new survey from MoneyTips.com, an online personal finance community geared at 18-to-34 year olds. Young adults describing themselves as satisfied with their current lifestyle, or successful, not only had more income but less debt, more savings, and more confidence in their ability to retire comfortably.

None of this would feel surprising if not for the widely espoused view that millennials favor quality of life issues including job flexibility, social impact, and personal experiences over career and earning power. Maybe they are growing up and realizing that money may help—or at least not hinder—such pursuits. Or maybe their worldview is evolving at a subconscious level as the real world bears down on them.

Either way, a generation that grew up with participation trophies and helicopter parents—and unbridled optimism—seems to be waking to the connection between a satisfying life and healthy finances. Nothing in this survey suggests millennials have lost their zeal for meaning. But financial security has a creeping sense of place.

Asked what financial concerns keep them up at night, 46% of millennials who call themselves successful cite being able to earn enough to secure their future. That compares with 55.6% of all millennials. Likewise, just 23.7% of self-described successful millennials worry about their ability to pay day-to-day expenses, and 33.6% worry about their ability to live within their means. That compares with 41.2% and 42.2%, respectively, for all millennials. A higher percentage who feel satisfied also say they are on track to meet their financial goals, have calculated how much they will need in retirement, and stick to a monthly budget.

About 40% of self-described successful millennials owe at least $15,000 while 45% of all millennials owe that much. When it comes to money in the bank, 58% of successful millennials have at least $10,000, while just 46% of all millennials have that much. Certainly, savings and income aren’t everything. But this next generation has come a long way from thinking finances matter little at all.

MONEY Financial Planning

5 Simple Questions that Pave the Way to Financial Security

Analyzing 20 years of data, the St. Louis Fed found that five healthy financial habits are the key to future wealth.

Want to know how your bank account stacks up against that of your neighbors? You’ll get an idea by asking yourself five simple questions, new research shows.

The St. Louis Fed examined data from the Federal Reserve’s Survey of Consumer Finances between 1992 and 2013 and found a high correlation between healthy financial habits and net worth. In the surveys, the Fed asked:

  • Did you save any money last year? Saving is good, of course. Just over half in the survey earned more than they spent (not counting investments and purchases of durable goods).
  • Did you miss any credit card or other payments last year? Missing a payment isn’t just a sign of financial stress; it may trigger late fees and additional interest. An encouraging 84% in the survey made timely payments.
  • After your last credit card payment, did you still owe anything? Carrying a balance costs money. In the survey, 44% said they carried a balance or recently had been denied credit.
  • Looking at all your assets, from real estate to jewelry, is more than 10% in bonds, cash or other easily sold, liquid assets? If you don’t have safe assets to sell in an emergency, you are financially vulnerable. Just over a quarter of those in the surveys have what amounts to an emergency fund.
  • Is your total debt service each month less than 40% of household income? This is a widely accepted threshold. A higher percentage likely means you are having trouble saving for retirement, emergencies, and large expenses.

The average score on the 5 questions was 3, meaning that the typical respondent—perhaps your neighbor—had healthy financial habits 60% of the time. That equated to a median net worth of $100,000. Those who scored higher had a higher net worth, and those who scored lower had a lower net worth.

In general, younger people and minorities scored lowest, while older people and whites scored highest. Education was far less relevant than age. “This may be due to learning better financial habits over time, getting beyond the financial challenges of early and middle adulthood and the benefit of time in building a nest egg,” the authors wrote.

It should come as no surprise that healthy financial habits lead to greater net worth over time. But the survey suggests a staggering advantage for those who ace all five questions. One of the lowest scoring groups averaged 2.63 out of 5, which equated to median net worth of $25,199. One of the highest scoring groups averaged 3.79 out of 5, which equated to a median net worth of $824,348. So these five questions not only give you an idea where your neighbors may stand—they pretty much show you a five-step plan to financial security.

TIME Economy

Minimum-Wage Increases Go Into Effect Across the Country

The wage hikes in several states and D.C. are expected to affect 3.1 million people

Roughly 3.1 million workers across the United States woke up to a little New Year’s Day present on Thursday, January 1, when increases in the minimum wage took effect in 20 states and the District of Columbia.

The recent bumps brought the total number of states with a minimum wage above the federal wage floor to 29, the New York Times reports. The federal minimum wage is $7.25 an hour.

Some of the increases are relatively tiny—a few cents—while some, of a dollar or more, could have a more significant impact on the economy. Minimum wage hikes in more states are set to take effect later in the year, according to the NYT.

The minimum wage hike is expected to impact 3.1 million of the 3.3 million Americans who earn the minimum wage.

[NYT]

TIME Television

Suze Orman to Leave CNBC After 14 Years

AOL's BUILD Speaker Series: In Conversation With Suze Orman
Suze Orman speaks during AOL's BUILD Speaker Series Jenny Anderson—WireImage

621 episodes of 'The Suze Orman Show' have aired to date

Personal finance expert Suze Orman is saying goodbye to CNBC after 14 years with the network.

The Suze Orman Show, which has been on the air for 621 episodes to date, aired only once a week, on Saturdays. Now, Variety reports, the anchor will head a show five nights a week, called Suze Orman’s Money Wars, through Warner Bros.’ Telepictures Productions. Its host network has not yet been announced.

“I want to personally thank Suze for her friendship and for her incredible contributions to CNBC,” channel president Mark Hoffman wrote in a staff note Tuesday.

The final episode of The Suze Orman Show will air March 28.

[Variety]

MONEY

Surprising Lessons from the Latest Superstar Athlete to Go Broke

Columbus Blue Jackets defenseman Jack Johnson (7) during the NHL game between the Boston Bruins and the Columbus Blue Jackets at Nationwide Arena in Columbus, OH. The Boston Bruins defeated the Columbus Blue Jackets 4-3 in a shootout.
Aaron Doster—Cal Sport Media via AP Images

In Jonathan Rosen’s 1997 novel Eve’s Apple, a character describes her mother as someone who wanted to “have her kids and eat them, too.”

It’s hard not think of such parental malevolence when considering the recent bankruptcy filing of Columbus Blue Jackets defenseman Jack Johnson, whose financial woes were caused almost entirely by the financial evildoings of his parents. But despite the extreme nature of this case—and because of the surprising frequency of money troubles for professional athletes—there are two valuable lessons in Johnson’s travails that are relevant to sports fans and the rest of finance-fogged America.

Lesson 1: We should start teaching personal finance in kindergarten.

Despite a tremendous increase over the past 30 years in the number of reliable sources offering solid financial advice instruction to anyone who cares to learn—from Money magazine to motleyfool.com to most reputable financial services companies—most Americans are woefully ignorant when it comes to basic principles of money management. As a country, we just don’t know enough about borrowing, saving, investing and insurance. And while some some states are being taken to address this problem, we’re only at the early stages of what will be a very long process.

Don’t believe me? Check out the four main recommendations of the President’s Advisory Council of Financial Capability—all of them smart—and tell me how close you think we are to solving the problem. Every school, in every state, needs to incorporate financial literacy into curriculums from the earliest stages, i.e., from the time kids learn their ABCs and numbers. The only way to overcome the inherent tedium of personal finance—a topic about as exciting as someone else’s golf score—is to make it less of a “subject” and more of a tool. I’ve been writing about personal finance, on and off, for nearly a quarter of a century and the only way to successfully educate all but the biggest money nerds is to make zucchini bread. That is, we have to hide the good-for-you-but-unappealing-stuff (apologies to zucchini farmers) in more exciting fare.

Lesson 2: Professional athletes are particular vulnerable to being ripped off.

When we look at professional athletes we see (or imagine) any number of positive qualities: talent, discipline, focus, commitment, bravery. But while most of those traits exist to greater and lesser extent in all sports stars, the one quality that must be present is what insiders call “coachability.” For every athlete MLB, NBA, NFL or NHL athlete there were dozens of others with similar skills who weren’t able to make it to the big leagues because they wouldn’t or couldn’t follow directions. I worked at ESPN for 14 years and I was struck by nothing so much as the willingness of otherwise supremely confident and self-directed men and women to listen to their coaches, trainers and managers. For good reason, too: These authority figures possess expertise that athletes respect and desire, a treasury of knowledge and experience from which they hope to achieve success and extend their careers.

Accurate, real-time salaries for thousands of careers.

The problem with this malleability is that it often applies to experts in fields outside their core sport—such as health, nutrition or fitness—but especially comes into play with complex or arcane subjects like finance. Once an athlete trusts a financial adviser, heaven help him or her if said adviser is up to no good or even simply incompetent. (Heaven help all of us if it’s a parent who’s doing the exploiting.) Most of the major sports leagues and players’ unions recognize this and try to provide guidance, protection and warning to their athetes, but they could and should do better. I write this knowing how difficult such a challenge is, not just because athletes work as hard and as long as they do to earn their rich salaries but also because they are, generally, young and cavalier about risks of all kinds. Such is youth.

If I were King of The Sports World—a development unlikely to occur any time in the near future—I would require that a majority of every pro athlete’s earnings be directed to some kind of TIAA-CREF type organization that would safeguard their fortunes until they are through with their careers. Such an arrangement might not be popular (or legal or practical) but it would ensure that far fewer pro stars are fleeced because they haven’t been taught well to handle their money and have been taught too well to follow orders.

Oh, yeah, one other rule in my hypothetical sports realm: Even after athletes retire, I wouldn’t give them control of their money until they’ve taken a few financial literacy courses.

MONEY Investing

Pigs Fly: Millennials Finally Embrace Stocks

Jeans with cash in pocket
Laurence Dutton—Getty Images

Young adults have been the most conservative investors since the Great Recession. But now they are cozying up to stocks at three times the pace of boomers.

What a difference a bull market makes. The Dow Jones industrial average is up 160% from its financial crisis low, and the latest research shows that young people are beginning to think that stocks might not be so ill advised after all.

Nearly half of older millennials (ages 25-36) say they are more interested in owning stocks than they were five years ago, according to a Global Investor Pulse survey from asset manager BlackRock. This may signal an important turnaround. Earlier research has shown that millennials, while good savers, have tended to view stocks as too risky.

In July, Bankrate.com found that workers under 30 are more likely than any other age group to choose cash as their favorite long-term investment, and that 39% say cash is the best place to keep money they won’t need for at least 10 years. In January, the UBS Investor Watch report concluded that millennials are “the most fiscally conservative generation since the Great Depression,” with the typical investment portfolio holding 52% in cash—double the cash held by the average investor.

This conservative nature has raised alarms among financial planners and policymakers. Cash holdings, especially in such a low-rate environment, have no hope of growing into a suitable retirement nest egg. In fact, cash accounts have been yielding less, often far less, than 1% the past five years and have produced a negative rate of return after factoring in inflation.

Conservative millennials, with 40 years or more to weather the stock market’s ups and downs, have been losing money by playing it safe while the stock market has turned $10,000 into $26,000 in less than six years. Yes, the market plunged before that. But in the last century a diversified basket of stocks including dividends has never lost money over a 20-year period—and often the gains have been more than 10% or 12% a year.

Millennials are giving stocks a look for a number of reasons:

  • The market rebound. The market plunge was scary. Millennials may have seen their parents lose a third of their net worth or more. But with few assets at the time, the market drop didn’t really hurt their own portfolio, and stocks’ sharp and relentless rise the past six years is their new context.
  • Saver’s mentality. Millennials struggle with student loans and other debts, but they are dedicated savers. They have seen first-hand how little their savings grow in low-yielding investments and they better understand that they need higher returns to offset the long-term erosion of pension benefits.
  • Optimism still reigns. Millennials are easily our most optimistic generation. At some level, a rising stock market simply suits their worldview.

This last point shows up in many polls, including the BlackRock survey. Only 24% of Americans believe the economy is improving—a share that rises to 32% looking just at millennials, BlackRock found. Likewise, millennials are more confident in the job market: 32% say it is improving, vs. 27% of Americans overall. Millennials are also more likely to say saving enough to retire is possible: only 37% say that saving while paying bills is “very hard,” vs. 43% of the overall population.

Looking at the stock market, 45% of millennials say they are more interested than they were five years ago. That compares with just 16% of boomers. Millennials also seem more engaged: They spend about seven hours a month reviewing their investments, vs. about four hours for boomers.

This is all great news. Millennials will need the superior long-term return of stocks to reach retirement security. Yet many of them are just coming around to this idea now, having missed most of the bull market. In the near term, they risk being late to the party and buying just ahead of another market downdraft. If that happens, they need to keep in mind that the market will rebound again, as it did out of the mouth of the Great Recession. They have many decades to wait out any slumps. They just need to commit and stay with a regular investment regimen.

Read next:

Schwab’s Pitch to Millennials: Talk to (Robot) Chuck
Millennials Are Flocking to 401(k)s in Record Numbers
Millennials Should Love It When Stocks Dive

MONEY Financial Planning

Here’s What Millennial Savers Still Haven’t Figured Out

Bank vault door
Lester Lefkowitz—Getty Images

Gen Y is taking saving seriously, a new survey shows. But they still don't know who to trust for financial advice.

The oldest millennials were toddlers in 1984, when a hit movie had even adults asking en masse “Who you gonna call?” Now this younger generation is asking the same question, though over a more real-world dilemma: where to get financial advice.

Millennials mistrust of financial institutions runs deep. One survey found they would rather go to the dentist than talk to a banker. They often turn to peers rather than a professional. One in four don’t trust anyone for sound money counseling, according to new research from Fidelity Investments.

Millennials’ most trusted source, Fidelity found, is their parents. A third look for financial advice at home, where at least they are confident that their own interests will be put first. Yet perhaps sensing that even Mom and Dad, to say nothing of peers, may have limited financial acumen, 39% of millennials say they worry about their financial future at least once a week.

Millennials aren’t necessarily looking for love in all the wrong places. Parents who have struggled with debt and budgets may have a lot of practical advice to offer. The school of hard knocks can be a valuable learning institution. And going it alone has gotten easier with things like auto enrollment and auto escalation of contributions, and defaulting to target-date funds in 401(k) plans.

Still, financial institutions increasingly understand that millennials are the next big wave of consumers and have their own views and needs as it relates to money. Bank branches are being re-envisioned as education centers. Mobile technology has surged front and center. There is a push to create the innovative investments millennials want to help change the world.

Eventually, millennials will build wealth and have to trust someone with their financial plan. They might start with the generally simple but competent information available at work through their 401(k) plan.

Clearly, today’s twentysomethings are taking this savings business seriously. Nearly half have begun saving, Fidelity found. Some 43% participate in a 401(k) plan and 23% have an IRA. Other surveys have found the generation to be even more committed to its financial future.

Transamerica Center for Retirement Studies found that 71% of millennials eligible for a 401(k) plan participate and that 70% of millennials began saving at an average age of 22. By way of comparison, Boomers started saving at an average age of 35. And more than half of millennials in the Fidelity survey said additional saving is a top priority. A lot of Boomers didn’t feel that way until they turned 50. They were too busy calling Ghostbusters.

MONEY mobile banking

How Millennials Will Change the Way You Bank

woman with iphone image of her mouth in front of her mouth
The mobile generation wants to do everything with pictures instead of words, including paying bills and depositing checks. Maciej Toporowicz—Getty Images/Flickr Select

Nearly all young adults carry a smartphone and prize the camera as its key feature — not just for selfies, but as a means to conduct their life without words.

If a picture is worth 1,000 words, soon we may not need words anymore. Nearly nine in 10 young adults are never without their smartphone, and a similar percentage say the camera function is among the most important features, new research shows. This love of the visual has broad implications for all businesses, perhaps most notably banking.

The youngest millennials have almost no memory of cell phones without cameras. They post pictures to avoid writing about events in their lives and snap photos as reminders to perform ordinary tasks. A third of all pictures taken are selfies, according to a report from Mitek Systems and polling firm Zogby Analytics.

This generation wants to do everything with a snapshot—from clicking a picture for online purchases to depositing money or paying a bill by snapping an image of a check or invoice. Four in five millennials say it is important for retailers to have a high quality mobile app; nearly nine in 10 either have or would deposit money in their bank with mobile technology, the report found.

“There is a substantial disconnect between what young people have come to expect and the often horrendous consumer experience they get with mobile,” says Scott Carter, chief marketing officer at Mitek. Banks have been among the slowest to respond, he says. About half of consumers who try to open a bank account online give up because it is so tedious, Carter says.

A bank that adopts more sweeping image technology such as facial recognition or fingerprint identification and uses it to replace passwords and the need to fill in account numbers would be a big winner—and not necessarily just with the younger set. Mobile banking is taking off with all generations. Only 12 million people used mobile banking services in 2009, according to Frost & Sullivan, a research firm. That number was expected to hit 45 million this year.

More than one in eight Americans have deposited a check within the past year using a mobile app, the American Bankers Association found. Of those, 80% use the app at least once a month. Other findings from the Mitek survey of millennials:

  • 34% have deposited a check by taking a picture
  • 54% would pay for goods using their smartphone as a mobile wallet instead of credit cards
  • 45% would pay a bill by taking a picture if the technology were available to them, vs. the 21% who do so now
  • 36% have switched where they do business based on a company’s mobile app
  • 60% believe that in the next five years everything will be done on mobile devices, much of it through images

We will never be a wordless society. But just think about those awful assembly instructions that come with a box of parts at IKEA or Target. If a YouTube video or other image makes it easier, why fight? A lot of people think of banking and personal finance the same way—and for them, a picture really is worth 1,000 words.

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