PENNINGTON: Affluent young consumers in the US have adopted a conservative approach to their finances and are focusing on saving for retirement, according to new research.
Merrill Edge, an online brokerage owned by Merrill Lynch and Bank of America carried out a study of "mass affluents", the 25m US households with investable assets of between $50,000 and $250,000.
It found that 77% of Generation Y, those aged 18-34, planned to grow their retirement savings over the next 12 months.
This was significantly ahead of other financial commitments like investing in the stock market (57%) or making a major purchase such as a car (57%).
Paying down the mortgage was a focus for 45% of Gen Y while 44% expected to contribute more to their children's college fund.
This group started saving for retirement, on average, at the age of 22 and now has $55,000 put aside. They also anticipate a comfortable old age, having saved $2.5m by the time they retire, compared to an average expectation of $860,000.
"Given that many Millennials are delaying their decision to have children and the associated financial responsibility, affluent Millennials have the opportunity to save more and have seen the market improve nicely," Jeff Fromm, EVP at employee-owned advertising agency Barkley, told MediaPost.
But even those with a family were exhibiting prudent financial behaviours. Those in the sample with young children expressed a readiness to cut back on family vacations (47%) or a new car (45%) in order to contribute to a college fund for their children.
The experience of US mass affluent Gen Y contrasts with the UK where people in their 20s and 30s are delaying significant life stages. The average age for taking out mortgages, getting married and having children is getting steadily older, while increased numbers of people aged 20-34 continue to live with their parents.
Separate research released recently by the Future Foundation has noted an increase in offers from financial services firms to Gen Y consumers with the explicit aim of helping young customers reach important landmarks.
Data sourced from MediaPost, Merrill Edge; additional content by Warc staff