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Published January 23, 2014, 04:15 PM

Peer pressure: Millennials influenced by friends’ spending habits; parents are part of the problem

Fargo - Alicia Kellebrew isn’t worried about keeping up appearances. The 31-year-old financial professional with The Village Family Service Center in Bismarck tells friends when she can’t afford to dine out or go shopping, and her restraint pays off when her savings account grows.

By: Anna G. Larson, INFORUM

Fargo - Alicia Kellebrew isn’t worried about keeping up appearances.

The 31-year-old financial professional with The Village Family Service Center in Bismarck tells friends when she can’t afford to dine out or go shopping, and her restraint pays off when her savings account grows.

“I have some friends who are OK with that and some who aren’t OK with that. We want to look good to people. We, as a society, have it in our minds that how successful you are is determined by what you have and what you look like,” says Kellebrew, who’s certified by the National Foundation for Credit Counseling. “If you’re doing all that just to impress other people, you’re comparing yourself to other people, and you don’t know how much debt they went into to have that. I find myself doing that, too.”

Nearly three-quarters of 25- to 34-year-old women compare their own financial situation to that of friends, according to a recent survey by the American Institute of Certified Public Accountants and the Ad Council.

More than half of women said it was important that they keep up with the clothing, accessories and gadgets their friends own and the restaurants and bars they frequent.

The “keeping up with the Joneses” mindset might be why 40 percent of millennial women rely on money from parents and other family members to make ends meet. They’re also using credit cards to cover necessities like groceries and splurges like trips.

“I’ve seen it in my office – people have a boat, a camper and a vacation home, and they can’t afford their groceries,” Kellebrew says.

One reason some female millennials aren’t financially independent is the lack of discussion about money, Kellebrew says, adding that male millennials are also showing the same financial behavior.

She references a study in which parents responded that they’d rather talk to their kids about sex or drugs than money.

“People look at me strangely when I talk about money,” Kellebrew says. “Those are discussions that need to happen, and people need to remember that it’s not always what you tell your kids, it’s what you model for your kids.”

Chris Mason, an associate professor of finance at Concordia College’s Offutt School of Business in Moorhead, says parents can cause some of the adverse financial behavior if they’re constantly footing the bill for their children. He calls it a “failure to launch.”

“It’s easier as a parent – and I’m a parent of five – to do things for them as opposed to having them do things themselves. Teaching someone how to do something takes a lot more time,” he says.

He suggests teaching kids how to manage a weekly allowance so later in life they understand how to save money and can determine what’s worth buying.

“It helps them understand that decision-making process before you launch them and makes kids comfortable with putting off desires,” says Mason, who’s also president and chief investment officer of Fontis Investments in Minneapolis.

Once children graduate college, he considers them “launched.” They can’t come back to live at home. Parents who don’t launch their children are doing them a disservice, Mason says.

“As a parent, it’s tough to see them struggle, but I learned more in those times of struggle than when times were really great,” he says.

Kellebrew regularly sees parents who don’t know how to stop providing for their children. She asks them if their child will starve or be homeless if they cut off funding.

“Nine times out of 10, it’s ‘no,’ ” she says. “Some parents have a really hard time with that. They want to take care of their kids so much that they don’t register the impact that it’s having on them financially.”

Besides parental influence, Mason says millennials often trade saving for instant enjoyment.

“Saving is much more important than making sure you have the Burberry topcoat. That concept of immediate gratification is prevalent in our society,” he says.

Edward Jones financial adviser Sarah Nikle agrees, saying millennials are highly influenced by their peers and the “here and now” rather than the future.

“We see something, and we go out and buy it. There isn’t much saving,” says the 27-year-old. “The biggest mistake people can make is delaying the inevitable. Not getting started on saving or investing or preparing themselves to purchase.”

The comfortableness of credit also feeds the desire to buy rather than save, Nikle says.

“If we’re digging that hole deeper and deeper, interest rates are going to get you further in. It’s almost impossible to get out of,” she says. “It’s a domino effect, and it really starts with putting anything on that credit card and not being able to pay it on a monthly basis.”

Other factors that experts point to for the lack of financial independence among millennials include student loan debt, a weak job market, having too many monthly payments (loans, a car, etc.), and wages that haven’t kept up with the cost of living.

Kellebrew hopes her peers will stop keeping up with each other and start keeping tabs on their spending.

“People have to remember that whenever they’re judging themselves against someone else, they don’t know the whole story,” she says. “We have to be honest with ourselves, and we have to be honest with everybody else about what we can reasonably do. We have to hang in there.”

Readers can reach Forum reporter Anna G. Larson at (701) 241-5525