We hear a lot of buzz about millennials and their management - or lack thereof - regarding finances. As with any group we decided to put under the microscope, it’s hard to define their behavior with exact science. Patterns are magnified and some things are pretty clear though. The financial strategies that worked for Baby Boomers and Generation-X, may not work for Millennials.
What Sets Millennials Apart?
Worldwide, Millennials are the largest generation in history. As these numbers reach a sort of critical mass (adulthood) they’ve come to define the global economy. Millennials currently hold more than 2 trillion in various assets- no small accumulation.
By classification, those born in the early 1980’s until the millennium are considered Millennials. Today that puts them, typically, in the still early stages of careers. Historically, this group has witnessed recession in every decade alive. All too familiar with the ups and downs of employment, most Millennials have faced setbacks in terms of work – whether it’s been in terms of availability, unemployment or “under” employment.” Often, Millennials have been forced to move back home with parents in order to work out their still developing support system for the future. This is why they earned the nickname “Boomerang Generation.”
Moving back in with the parents carries with it that connotation of humiliation and failure. Many attach that to a sort of millennial attitude, charged with pride and self-empowerment. Taken together it might seem that this group would be reluctant to ask for help. In fact, research has shown that Millennials are quite willing to take advice, especially from other Millennials. Since they are similar ages and often share similar values, this group is actually exemplary for being resourceful, helping one another out and being community minded. Otherwise (and also counter to prevailing assumptions) Millennials rely heavily on the lessons of their parents.
What Do They Want?
As younger adults and blossoming professionals, Millennials are less concerned with stockpiling away money for retirement than previous generations were at the same age. Millennials hear “you have to save everything for retirement” but it’s not the first thing on their minds. Some saw their parents putting away for retirement only to lose it all in stock market crashes or be forced to tap into their savings due to unexpected layoffs or unforeseen illness. These impressions came at an age when their parents were too old to hire but too young to retire. It is unsettling to millennials and as a result, they turn their attention elsewhere.
The average age for marriage and children is much higher among Millennials compared to their predecessors. That’s not to say millennials are reluctant or slow to seek the domesticity of spouse, house, kids and dog. More important is that these goals haven’t diminished- Millennials still want these things- but they want them when they want them- on their timetable. It’s a box to be checked only after reaching certain milestones in careers or travelling for example.
Culturally, some say that much of this putting off family trend comes from the staggering divorce rate, particularly among the parents of millennials. At least 50% of all marriages in the United States fail – a trend born in the 80’s that despite a recent plateau, people believe will only continue to increase. Ask an unmarried millennial what they say about their prospects. Most will tell you they want to be very sure they’re marrying Mr. or Miss Right before walking the aisle. This stands to contradict the stereotype that Millennials are motivated by a sort of must-have-now mentality.
As demand for urban living and the ability to work remotely increases, Millennials are receptive to renting for longer periods of time and delaying home-ownership. Ask a 30 year old how they feel about their month-to-month rent and don’t be surprised at their satisfaction with the circumstances. They might remark on not being “tied down” financially or “locked in” to city or an address – and that it’s liberating. Millennials value mobility. They value higher education and traveling. These priorities may be short term but they’re uniquely a part of a Millennial’s financial goals in the long run. For example, stashing away for a big trip planned 5 years from now is a short term savings plan with long term logic. That money might not contribute to life at age 60, but Millennials understand traveling at 30 is different from traveling at 60.
In Australia, almost 40% of Millennials report being unsure, or in the dark, about retirement funds. They simply don’t know what’s required of them. They’ve heard the, “save for a rainy day” and “save for your future” but aren’t necessarily confident as to how to do so. Some feel they aren’t making enough to save or are too focused managing their money for things they can actually relate to. (Growing old is not always one of them.)
There’s also the feeling that they’ll never have to retire. With countless ways of making money (the majority of them dreamed up by Millennials themselves) there is a logic behind the beliefs - there’ll always be something else to do, somehow else to earn, some way to make things work. The rise of the gig economy supports that confidence interestingly enough. Empowered by their own ability to manage multiple jobs, maintain a few websites, be an Uber driver on the weekends and earn Airbnb cash while away on vacation – it makes sense that Millennials think this way.
Ultimately, Millennials want similar things as their older peers but their approach has been and will continue to be different. Millennials still desiring to build a family, own a home and plan a stable future should know it’s never too late to start. Seeking financial advice strategy and solutions from professionals is wise especially when the wisdom from older generations proves irrelevant. Baby Boomers and Generation X simply cannot empathize with current salary or economic conditions. Time will tell how Millennials endure and plan their futures.