Of millennials who work, 62.8% do not save for retirement, 27.2% have done so in the past and only 10% do so systematically, and attitude and behaviour are the keys to understanding how this generation faces the issue of retirement savings. This is one of the main conclusions of the study Demystifying Millennials: Generation Y’s Attitudes and Behaviours Towards Saving, carried out by Esade and Fundación Edad&Vida, with the support of Banc Sabadell. The study was presented at a press conference this Thursday at the foundation’s headquarters in Barcelona.
The goal of the study was to gain a better understanding of millennials and demystify this generation’s beliefs, with the aim of offering solutions to facilitate their decision-making process.
The press conference featured the participation of Ismael Vallés and Manel Alfaro, professors of marketing at Esade and co-authors of the study; Claudio Chiesa, director of BanSabadell Vida, BanSabadell Pensiones and BanSabadell Seguros Generales; and María José Abraham, director of Fundación Edad&Vida.
In Spain, millennials or Generation Y (people born between 1981 and 1996) make up 18.7% of the population, a smaller cohort than Generation X (people born between 1969 and 1981), who make up 26.2% of the population. At the global level, millennials make up 24% of the population, compared to 1.8% for Generation X and 17% for Baby Boomers.
More savers and consumers
Millennials are optimistic by nature, identify more as savers than as consumers, and are aware of the need to save for retirement. However, despite being a better educated generation, millennials perceive their own financial culture as insufficient. Millennials seek out advice on savings and investment decisions. In fact, the main reason among millennials for not saving has to do with their attitudes, not their economic situation.
Among other insights, the study concludes that 12.5% of millennials do not recognise the need to save for retirement, 18.7% recognise the need to save but do not do so, 31.6% have considered saving for retirement, 27.2% have saved for retirement at some time in the past, and 10% save for retirement systematically.
In fact, among those who do not save, the main reason is not related to their economic situation, but rather their personal attitudes. Of those who believe that saving is not a problem, 55% have a good economic situation; of those who say they do not save because they cannot, 70% have a good economic situation.
In comparison with figures from a decade ago among people aged 18-35 years, the study found a positive trend in segments that are less aware of the need to save for retirement, due to their history of having lived through a financial crisis and the ongoing social debate on the topic of pensions. However, according to Esade faculty members Ismael Vallés and Manel Alfaro, co-authors of the study, this positive trend “has not translated into an increase in the number of millennials who systematically save for retirement, probably due to their distrust of institutions and the banking sector”.
Advice and savings
Another conclusion of the study is that the level of confidence in the pension system, banks, and institutions in general is very low, although millennials do seem to grant financial institutions a shot at redemption. Claudio Chiesa, director of BanSabadell Vida, BanSabadell Pensiones and BanSabadell Seguros Generales, commented: “Specific strategies need to be developed and implemented in order to convince millennials who do not save for retirement that they should adopt behaviours that favour retirement savings.” He added: “We need to abandon our product- and sales-focused orientation and instead focus on the needs of each young person, particularly by providing advice on how to save at every stage of life.”
Despite being a digital generation, millennials consider that technology is not a decisive factor in relation to retirement savings. According to the study, millennials believe that advice is the most important factor, whereas technology is merely complementary. In terms of savings management, the study authors conclude that “there is life beyond mobile phones” for millennials.
Regarding millennials’ purchasing process in relation to savings products, the study sheds light on this generation’s information-search habits. As a rule, they tend to use the Internet to analyse the available alternatives. Vallés commented: “Once millennials have obtained the information they need, they expect someone to guide them. They value banks that provide advice rather than just trying to sell them financial products.” He concluded: “Young people expect financial advisors to be professionals who are highly knowledgeable on financial matters, with the skills to help them in the process of saving money.”
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