Data & Research June 15, 2016

Many Parents Put Children’s Education Ahead of Retirement Savings

A majority would go into debt to fund their child’s college education.
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Thirty-seven percent of U.S. parents say their children’s education is more important than their own retirement savings, according to a survey by HSBC Group.

Sixty percent of U.S. parents would go into debt to fund their child’s college education, and 58% say that, while the expense makes it more difficult to keep up with other financial commitments, it is more important. In fact, 40% say it is more important than long-term savings and credit card repayment (37%), as well as retirement savings (37%).

Among U.S. parents under the age of 34, 74% would consider borrowing for a child’s education, compared with 56% of those over 35. Ninety-eight percent of U.S. parents are considering a college education for their child.

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American parents spend an average of $14,678 a year to fund a child’s education, nearly double the world average of $7,631. Although this number is seemingly high, students in the U.S. pay 37% of the college bills, one of the highest contribution rates in the world.

“The financial sacrifices that parents are willing to make to fund their children’s education are proof of the unquestioning support they will give to help them achieve their ambitions,” says Charlie Nunn, HSBC Group’s global head of wealth management. “However, parents need to make sure this financial investment is not made to the detriment of their own future well being. By having a financial plan to meet their family’s overall needs and reviewing it regularly, parents will be better placed to support their children’s studies without compromising on their own long-term financial goals.”

HSBC Group surveyed more than 6,200 parents in 15 countries.

Data & Research June 15, 2016

Millennial Advisers Far More Optimistic on Markets Than Their Counterparts

Nearly three-quarters think the market volatility will settle down by year’s end.
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Seventy-four percent of Millennial advisers think the current market volatility will settle down by the end of the year, compared with just 43% of all other advisers, according to a survey by Eaton Vance. While 56% of other advisers think volatility is the “new normal,” only 26% of Millennials think so.

Forty-percent of Millennial advisers believe volatility is part of the investment process, and 30% believe it presents an opportunity to generate income. In fact, 40% of Millennial advisers say the market volatility has helped them gain new clients.

Forty-one percent of Millennial advisers think the Federal Reserve is the biggest driver of market volatility, compared with 23% of advisers from other generations. On the other hand, 27% of non-Millennial advisers think stalled economic growth is the major driver of market volatility, compared with 11% of Millennial advisers.

Other big drivers of market volatility, Millennial advisers say, are turbulence in the Chinese economy (28%), instability in the European Union (12%), sluggish economic growth in the U.S. (11%), and geopolitical issues (8%). Nonetheless, 38% of Millennial advisers are more confident in the U.S. economy than they were 12 months ago.

As to how they are grappling with market volatility, 49% of Millennial advisers are turning to high-yield bonds, municipal bonds (42%), floating-rate bonds (40%), multi-sector bond funds (33%) and government bonds (23%).

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Projecting out three to five years, 50% of Millennial advisers think a professional managed strategy will be key, 34% expect to lean on bond mutual funds, 12% look to bond separately managed accounts, and 6% are planning on laddered bond portfolios.

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