In about four to five years, millennials will make up the biggest portion of the South African work force. This often-misunderstood generation, born between 1980 and 2000, are especially tech savvy and protective of their individuality. One might assume that they are equally savvy when it comes to their future financial planning but sadly, this is not the case, with recent studies showing that a meagre 25% of working millennials are saving enough for their retirement.
These shocking statistics indicate a possible future where we might have an entire elderly generation without the financial means to support themselves. The burden on the country and the public will be massive. Although these figures are freely available and should normally inspire people to re-evaluate their financial wellness, so many young professionals still deem retirement saving as unimportant. Why?
Cornerstone Employee Benefits is passionate about the future financial wellbeing of the youth of our country and decided to delve into the mystery of millennial saving (or the lack thereof) while looking for ways to get this powerful generation excited about retirement planning.
The influence of their parents’ financial state
Most millennials today were old enough to experience the huge knock their parents took during the great recession in the late 2000’s. The impact of seeing their parents and other people (including many of the elderly) lose so much of their life savings overnight, has slanted their view on retirement saving. Thoughts like “my parents spent their whole lives saving yet they are still dependant on me and my siblings” and “what’s the point of investing money and then losing it all” has irreversibly changed the way millennials view long-term wealth.
To change this, the key message that accompanies retirement planning might have to shift from the bland “saving for retirement to live comfortably” to “building wealth to live and continue to experience life the way you want to.” To showcase the living benefits of savings instead of showcasing growth on a spreadsheet – millennials want to see and feel that they are saving for something.
Experiences trump things
It’s no secret that millennials would rather buy experiences than actual desirable items. Mostly, they spend their money on ways to interact with others while experiencing new cultures, interesting food or meet new people. To get more millennials interested in retirement savings, it must become an all-encompassing experience. Some possible solutions could be relying on more eventing that will allow for conversation and interaction, increased interactive experiences by making use of digital and mobile media while enriching their retirement savings experience with innovative products and investment opportunities.
Improved and updated communication channels
Many millennials feel that the traditional way of seeing a financial advisor is outdated and gives them less control over their financial decisions. Furthermore, they have negative perceptions of financial advisors and brokers which adds to the objection to conventional meetings. Many financial services providers still have a very old-school way of doing things and the only way to change the way millennials perceive retirement planning is to adapt to their communication needs. Improving financial literacy using newer technology like interactive web platforms and creating enticing content on social and digital media channels, will play a key role in changing the way they approach retirement planning. Giving them more control over their portfolios using mobile applications and other innovative solutions, will address the need for a more current and smarter way of doing things.
Most professional millennials are riddled with student debt before they even start their careers. This is one of the many things that prevents them from saving, because they simply cannot afford it. Many millennials return to university to continue with post graduate studies after a few years of work and incur even more debt. Unfortunately, this seems to be an unavoidable reality that very few can change, however a larger focus on financial literacy from a young age could help to empower our youth to be savvier with their student loans.
It’s clear that although millennials are responsible for some of the most innovative products, services and solutions of the century, they are putting themselves in a dangerous position if they don’t change their savings habits soon. We believe that education and inspiration is key to evoking this change across the youth of South Africa. What are your thoughts on millennial saving? Let us know by joining the conversation on our LinkedIn and Facebook pages. You can also learn more about Cornerstone Employee Benefits by clicking here.