Overview: Financial Independence, Millennial Perspective
Financial independence is a high priority for Millennials. To determine how Millennials define financial independence, we focused our research on surveys and articles that provided direct feedback from this generation. Below you will find the results of our research.
WHAT IS FINANCIAL INDEPENDENCE?
When Millennials between the ages of 18–26 years old were asked to define what adulthood meant to them, 40% of those surveyed indicated that financial independence was their top priority. According to Kate Asson, a Millennial who teaches personal finance courses, she views financial independence as “being fully self-reliant. The income you use to meet your expenses is driven by you and you alone.”
Another survey conducted on Millennials' views around when people should be able to pay their own bills yielded the following benchmarks:
----"A majority of millennials think they should be expected to pay for their own housing at age 22,
----Pay for their own car at age 20 ½
----Pay their own cell phone bill at age 18 ½."
Interestingly, a Merrill Lynch survey with Millennials indicated that only 14% viewed moving out as their top priority. Other general market research found that Millennials were more likely to live at home, with the US Census data placing this percentage around 40% (including those living in college dorms). This appears to indicate that living arrangements may be considered a vehicle to reach financial independence by Millennials.
A majority of our research indicated that Millennials strongly consider being debt-free and maintaining a savings accounts in their pursuit of financial independence. Less emphasis was placed on "moving out" as a means to obtaining financial independence. These factors have been broken down in greater detail below.
Given rising housing costs, lower wages, and high student loan debt balances, Millennials appear to place a higher emphasis on becoming debt-free as a means to pursue financial independence. This comes from their focus on paying down debt and finding other means to leverage expenses.
Paying Down Bills / Sharing Expenses:
For example, Alison Luhrs, a 28-year-old Millennial, claims that she'll be “debt-free in six months.” Luhrs continues to add that she’s been paying off her own debt for years and adds that “the only bills I share are a phone plan with my family and a Netflix account with my ex (he pays for Netflix, I pay for Hulu, we share passwords and separate viewer tabs).”
A 2016 study conducted by Fidelity found that almost half of Millennials get financial assistance from their parents in the form of help on phone bills and clothing. With shared family phone plans and shared online accounts, this type of financial assistance is becoming more acceptable as they offer both convenience and savings.
According to an informal survey of Millennials (primarily around the age of 30) conducted by Hanna Brooks Olsen, she found that "most pay their own rent or mortgage, though they do tend to share small accounts between friends or family regardless of age."
Living At Home
Many Millennials have arrangements with their parents to live at home as a means to obtain financial independence. The PEW Research Center found that 15% of Millennials between the ages of 25 and 35 lived with their parents in 2016, which was twice as many as those living at home in 1964. The US Census Data places this closer to 40%, including those living in college dorms. This appears to be supported by surveys with Millennials that indicate only 14% view moving out as their top priority.
Millennials, such as Jessica Bergman, a 25-year-old college graduate, often have agreements with their parents to remain at home to pay down their debt and eventually be independent. Bergman claims that “I lived at home and worked for two full years to pay back my loans before I moved out on my own.”
Overall Financial Position
Finally, Millennials attitudes toward overall financial position indicate that:
----They are less inclined to open credit cards accounts than their parents.
----They are concerned about their credit scores and how they are determined.
Based on the above, it appears that acceptance of some form of financial support from family members does not impact the Millennials' view of financial independence.
Research indicates that Millennials view maintaining savings accounts as a step toward their financial independence. This may arise from fears of a future recession. Notable statistics include:
----A survey conducted by Fidelity indicated that 85% of Millennials maintain some form of savings.
----A Merrill Lynch survey of 1,010 Millennials found that 66% of Millennials surveyed plan to rely on their savings accounts to help with expenses over the next 20 years.
----Millennials were also more inclined to have an emergency fund than their parents.
Overall, financial independence appears to be a high priority with Millennials. They place the highest priority on becoming debt-free and maintaining a savings account toward their quest for financial independence. Many will accept various forms of financial support from their parents in the overall pursuit of financial independence.