Data and Research

Written Financial Plans Help Americans Make Good Choices

Nearly three-quarters (72%) of Millennials developed their written financial plans with professional help, Charles Schwab finds.

By Rebecca Moore editors@strategic-i.com | June 23, 2017

People with written financial plans are more confident, more engaged with their wealth and demonstrate more positive saving and investing behaviors than average Americans, according to Charles Schwab’s new Modern Wealth Index.

Just 24% of Americans say they have a financial plan in writing. The index found 54% of those with a written plan increased their 401(k) contributions in the past year, significantly higher than the percentage to do so among those without a written financial plan. Half with a written plan rebalanced their 401(k) portfolio, compared to 24% without a written plan.

In addition, 83% of those with a written financial plan are aware of the fees in their brokerage account, 45% have an emergency fund, and 40% stick to a monthly savings goal, compared to 67%, 26% and 19%, respectively, of those without a written plan.

According to the index, more than one-third of Millennials (34%) say they have a written financial plan, compared to 21% of Generation X and 18% of Baby Boomers. Nearly three-quarters (72%) of Millennials developed their written financial plans with professional help, and 91% of them review or update their financial plans at least annually.

However, some Millennials’ immediate money habits do not coincide with long-term planning. Six in 10 lack a monthly savings goal (62%) or a household budget (58%). Less than one-third (30%) have built an emergency fund to cover at least three months of living expenses

Millennials also have room for improvement when it comes to debt management. Two-thirds (67%) say they don’t always make their student loans and mortgage payments on time, and nearly seven in 10 (69%) say they have credit card debt.

As Millennials age, their habits appear to improve, however. Among older Millennials in their thirties, 57% say their financial health is better than it was five years ago and nearly half (47%) say they have a household budget compared to those in their 20s (35%) who admit they do not.

The Modern Wealth Index, developed in partnership with Koski Research and the Schwab Center for Financial Research, is based on Schwab’s Investing Principles and composed of 60 financial behaviors and attitudes—each assigned a varying amount of points depending on their importance. The index broadly assesses Americans across four factors: goal setting and financial planning, saving and investing, staying on track, and confidence in reaching financial goals. Based on the total number of points received, respondents were indexed on a 1 to 100 scale for each of the four factors and an overall score.

The online survey was conducted by Koski Research from April 12 to April 20, 2017, among 1,000 Americans ages 21 to 75.