Latest statistics reveal how Millennials manage their finances

Find out how this generation spend their money and how organisations can assist them on their journey towards holistic financial wellness.

According to a recent survey done by Old Mutual to better understand the financial behaviour of employed millennials, 24% of millennials are currently invested in a unit trust – versus only 2% among older generations. The survey found that 57% of millennials invest in a unit trust with the purpose of increasing their net worth (1st) while 47% invest with the objective of reaching financial freedom (2nd). On the downside, the survey revealed that 35% of millennials are saving money to pay back debt, which is noteworthy as the number for older South Africans is 13%.

There are various reasons why this generation incur more debt than the generations before them including the buying of appliances and vehicles on credit while paying off educational loans and financially supporting family members other than their children.

The survey also showed that millennials are more likely to save money – in order of priority – towards travel (35% vs 10%), education (31% vs 4%), a car (32% vs 11%) or starting their own business (23% vs 3%) – than older generations.

Based on the studies’ findings, the following were identified as financial pitfalls that millennials face on their journey towards holistic financial wellness:

High levels of debt: The survey revealed that 64% of millennials had a personal loan (vs 14% of older generations) and 35% of their income was spent on servicing the interest on debt (vs 13% of older generations).

Not understanding the difference between saving and investing: According to the research an alarming 47% of millennials did not know what a unit trust was and 61% are saving money in a bank account. This insight suggests that there is little understanding of the difference between saving and investing.

Spending more than what you can afford: Trying to keep up with friends and family when it comes to lifestyle and to appear successful is not worth it. It is important for millennials to develop the ability to distinguish between ‘needs’ and ‘wants’ and to try and keep living expenses as low as possible.

Not having clear financial goals: It is nearly impossible to be disciplined when it comes to managing your finances if you do not have a goal. Most millennials and the generation before them are lacking when it comes to financial education as this is not something that is often taught at school or at home. This results in people living from one day to the next not knowing how much they have available for a rainy day or when they retire.

How can employers assist millennials to enable them to manage their finances effectively: Financial stress could have a very negative effect on an employee’s performance, therefore is it important for employers to provide employees with tools to assist them with achieving financial wellness.

Iemas Financial Services offers free financial wellness training at contracted employer groups. During these sessions important topics are covered such as how to compile a budget, managing your debt responsibly and the importance of saving. In addition, Iemas also offers financial products such as education plans, savings plans, investment plans and retirement annuities.

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Read related blog article here: Reach your financial goals by training your brain or Iemas Financial Services looks at the impact of low or negative economic growth and how to cope financially during these trying economic times.

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