Millennial women are demanding more workplace flexibility and work-life balance, but those perks might come at a very heavy price.
Have millennial moms got it all figured out?
Jennifer Landis, in a thoughtful article appearing in Fortune magazine, says that unlike their parents and grandparents, millennials have been successful at “finding a work-life balance.”
While baby boomer moms were struggling to shatter glass ceilings, millennial moms place greater value on staying home with the kids.
“In a recent survey, 60 percent of millennials thought a parent should stay home to care for children, while only 50 percent of Generation X and 55 percent of baby boomers agreed. For previous generations, this decision was part of a political and social movement, but today’s young moms see it as a personal choice.”
Today’s new reality does foster better work-life balance.
Technology is giving millennial moms the tools to work remotely from home, freeing them from the grueling 9-to-5 commute.
Landis says millennial women are better at finding partners who share child-rearing and household responsibilities, moving toward “a more egalitarian home life” than their parent’s generation.
They’re also less driven to climb the traditional corporate ladder. “Millennials do not seem to have the same lineal idea of workplace success,” says Landis. They’re more willing to freelance and combine side gigs to obtain the scheduling freedom they seek.
All in all, Landis makes a convincing case for how millennials are redefining parenting and lifestyle models. By sheer numbers, millennials already outnumber baby boomers and will dominate the workplace of tomorrow.
As proof of their impact, even traditional workplaces are providing more flexible maternity leave and childcare policies to accommodate the millennial workforce.
However, these young women who choose to stay home and freelance (38% of millennials, per Landis) may be on a crash course with reality if they’re not careful.
We already know that most women are woefully unprepared for a financial future where the responsibility for saving and investing is smack on their shoulders. But most freelancers don’t have access to a workplace 401(k), which provides the discipline and structure to save. Even with a 401(k), most women tend to under-save and under-prepare. Almost one-half of millennial women don’t even have a retirement savings account.
The gig economy and opt-out strategy may provide a more leisurely schedule, but it’s unlikely to lead to the consistent and disciplined savings strategy required to survive in today’s “pay your own way” retirement.
Furthermore, high divorce rates can disadvantage women who don’t accumulate enough assets and professional skills, leaving them facing a long, long lifespan but without the money they need to enjoy the ride.
Even their Social Security benefits will be reduced by years away from the formalized workplace and meager freelance salaries.
So what’s the solution?
Married women who opt out of the workplace can (and should) keep saving every year using a spousal IRA. They can also build assets with a spouse through a joint brokerage account. If you’re planning on going back to work later on, keep your skills current and your professional network up and running.
Check out our previous article: Stay-at-Home Spouse? 5 Ways To Not Get Left Behind For Retirement
Freelancers have great (and totally cost-free!) retirement account options available to them, like individual 401(k)s, SIMPLE-IRAs, or SEP-IRAs. Ask your financial advisor for guidance. The key to success? Save 10 to 15% of income each and every year. You can build up your savings balance and get a tax-deduction to boot.
Hint: Many freelancers put off saving for years, waiting for that “perfect moment” that may never come. Don’t make that mistake. Saving is a habit that you want to exercise early and often.
Freedom from the 9-to-5 grind can be a great thing, but it doesn’t always come free. If your income is reduced or varies month-to-month, like many freelancers, keep a close eye on your expenses. You can’t afford to get in debt or let spending outstrip your earnings. It doesn’t mean you can’t live on less than two salaries; it just means you may need to cut back to afford that extra freedom.
The Takeaway: Landis sensitively captures the parenting and lifestyle concerns of millennial women. She draws attention to the work-life challenges facing women today, and the difficult tradeoff between more work/no time and more time/no money.
Unfortunately, the real-life cases we see everyday in our financial planning practice suggest that, for at least some of these millennial moms, their decisions today may lead to serious financial regrets down the road.
It’s all about choice. So here’s a tip. Greater flexibility usually comes at a cost. Just make sure you understand what you are gaining and giving up when you choose. Ultimately, that’s the secret behind all good money decisions.