When climate-change fears dampen retirement-saving motivation

Millennials who fall victim to catastrophic thinking need an extra push to build up their nest egg

When climate-change fears dampen retirement-saving motivation

How do you get clients to save for retirement, invest, or engage in estate planning? Typically, the answer lies in reframing — getting them to think about their future. But focusing on the future may also end up having the opposite effect on younger generations.

Citing a report from the National Institute on Retirement Security in the US, MarketWatch contributor Kari Paul wrote that two thirds of American millennials have nothing saved for retirement; figures from Fidelity suggest show that millennial savers had an average balance of US$25,500 and were contributing just 7.3% of their paycheques as of the second quarter of 2018.

Most millennials cite overwhelming expenses to explain their untenable financial positions. But according the CEO of a Washington, D.C.-based online retirement investment platform, some are grappling with a more serious problem: whether they have any future to save for.

“There is a certain fatalism in this population relative to more recent generations,” said Fellowes, CEO of United Income. “From a perception point of view, I hear a lot of cynicism about the ability to build retirement savings or whether they will be able to retire at all.”

Fellowes argued that millennials, more than past generations, have been primed to adopt a defeatist attitude about the future. Supporting that point, Brad Klontz, an associate professor of practice at the Financial Psychology Institute, noted the dot-com bubble burst, the Sept. 11 terrorist attacks and the ensuing wars, and the 2008 stock-market crash that precipitated the housing crisis.

“After watching their parents lose a job or a home, millennials are contending with a deep distrust for financial institutions and the stock market,” Klontz said. “That brings out catastrophic thinking, because they’ve already seen a catastrophe.”

Those events led to the tipping point, the thinking goes, for 72% of millennials to succumb to “eco-anxiety.” That number comes from the American Psychological Association, which defines the condition as a depressed sense of well-being associated with the inevitability of climate change. The Bank of Canada’s recent report citing a negative impact on the country’s economy can’t be encouraging for young Canadians, either.

So what can advisors do to help young clients who have succumbed to that thinking? One piece of advice from the Ontario Securities Commission (OSC) might help. In a 2018 report on ways to encourage millennial investment, the OSC recommended the use of social comparisons: by providing data about what their peers are doing to prepare for their future, advisors can motivate millennial clients to do more for their financial future.

Another suggestion, this time from the Financial Psychology Institute’s Klontz, is to construct positive visions of the future, with details on where they will live, whom they will spend time with, and how they hope to enjoy that time. Alternatively, he said, young clients might be convinced by considering a good news-bad news scenario: being financially unprepared in a world that defied their gloomy expectations.

“The future might be terrible. But chances are it won’t be,” he said. “Chances are, the world will still exist in 40 years, and you will need money to meet your needs.”


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