Study reveals that financial independence is the top priority for young people aged between 18 and 34
Advisors looking to connect with clients who are in the early stages of adulthood have been handed some in-depth insights by a new Merrill Lynch study in partnership with Age Wave.
And if they were looking for any kind of validation of their importance, the study should provide it, concluding that financial independence (75%) is more important to young adults between 18 to 34 years old, ahead of employment (61%), homeownership (30%) or starting a family (20%).
Despite this being their number one goal, the 2,700 respondents in the US said it was harder to achieve for their age group than it was for previous generations because of mounting debt and higher costs of living. A total of 70% of baby boomers - many being of their parents' age - agreed.
Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America said that to help achieve the desired level of financial independence, adults can focus on developing smart habits, identify key areas to cut expenses to free up money and seek out guidance.
She said: “Early adulthood is an exciting time of exploration and self-discovery but there are new choices and challenges as well. Today’s young adults are encountering more complex financial paths than prior generations, forcing them to postpone life milestones and putting their ability to save for retirement at risk.”
Advisors will be heartened to learn that 72% of early adults say they would benefit from more financial guidance – more so than in any other life stage – especially as they see it as their main source of stress and top barrier to achieving their life goals.
In arguably two areas unique to young adults in this day and age, 60% define financial success as being debt-free, compared to only 19% who believe financial success is being rich. Early adults have accumulated nearly $1.6 trillion in student debt today.
The other modern-day factor is the prevalence of social media, which the study found compounds money pressures, with 68% feeling they are missing out on what their peers are experiencing and 49% admitting they are addicted. Worryingly, 82% said they feel pressure to make a lot of money and 60% said they feel pressure to buy things they can’t easily afford.
Ken Dychtwald, CEO of New Age, said older generations are making a big mistake if they think they can understand current early adults through the same lens as decades ago.
He said: “More than ever, early adulthood is a complex matrix of new choices, freedoms and financial responsibilities – and it’s a life stage as exhilarating as it is challenging. As early adulthood becomes redefined by multiple forces, from the dominance of technology and rising levels of debt to an increasingly diverse workforce, it is a mistake to assume that you understand early adulthood today if you experienced it decades ago. When we reviewed the results of this study, I realized I was never their age!”
The study also threw up the relative outperformance of women, who are more highly educated and ready for the jobs of the future. It revealed that for every 100 young men who completed college last year there were 141 women.