It’s said that the Millennials aren’t like other generations – they’re thought to be tech-savvy, extremely self-confident, probably university-educated, excellent multi-taskers, often addicted to an online world but with a clear plan for career development in a real life.
But what about Millennials and money? Here are the money challenges facing today’s Millennial generation – and how they differ from their predecessors.
Millennials might be everywhere, but they’re important. Already a major part of the economy and the largest section of America’s workforce, the Millennials are set to shape the future of the world.
But they’re also living in uncertain times, especially when it comes to money. Here I take a look at Millennials approach to money, how it might affect them, and how they compare to previous generations like the Baby Boomers.
Who are the Millennials?
Millennials, also known as Generation Y, are people born from around 1980 to around 2000. There are more than 84 million Millennials in the United States alone.
6 ways Millennials differ from their predecessors:
1. They have wildly different money goals
Millennials’ approach to money differs strikingly from previous generations like the Baby Boomers and Generation X.
Facebook should know a thing or two about Millennials, given the majority of its users fall into that bracket – earlier this year the social network published some research based on the conversations US-based Millennials were having.
Facebook’s analysis found:
- Nearly 50% of Millennials say the main indicator of financial success is being debt-free.
- Only 1-in-10 said being able to retire was an indicator of financial success.
- Millennials tend to think short-term – they do save, but tend to save for things like a holiday rather than an investment for the future.
- They don’t know much about investment either – a quarter said they didn’t know how to.
2. They plan to work for longer (but doing what they like)
Given increased life expectancy, it’s perhaps no surprise that Millennials plan to work for longer than their predecessors.
The Generation Debt interactive, for example, developed by finance experts Wizzcash, shows the average life expectancy for Millennials is currently 80 years of age.
This puts the onus on businesses to start prepping for an older workforce, people who will be working much later in life than their forebears did.
But it also asks questions about the Millennials and their approach to money. If, as indicated by the Facebook research, retirement isn’t an indicator of financial success, how do the Millennials plan to live, work and play without a pension? According to this CNN piece for example, 37% of Japanese Millennials plan to work until they die.
3. They have university fees and hefty rents
Millennials around the world have been affected by the bringing-in or ramping-up of university tuition fees.
In the UK for example, university tuition fees were brought in shortly before the millennium. Costing as much as £9,000 a year, and set to rise further for students in England, these fees are exacerbated by maintenance loans.
The Institute for Fiscal Studies estimates that UK students will leave university with nearly £20,000 more debt following changes announced in 2012. Consumer group Which? suggests a student on a 3-year course might expect to graduate with around £35,000-£40,000 of student loans.
Now, these loans are not like personal loans from banks – the interest is smaller and students pay back once they start earning a certain amount. Still, when compared to previous generations who paid no university fees at all, the difference is stark.
And then there is renting. Many Millennials, unable to gather together the deposit needed for a mortgage, are turning to renting. But it isn’t cheap. In London in particular, rents are notoriously skyrocketing.
4. They plan to help their children with money
After seeing the reality of paying for higher education, Millennial parents are keen to ensure their children don’t suffer the same fate. Research by Fidelity, which polled US Millennials, found nearly half of parents in their early thirties plan to pay for the full (yes, full) college bill for their kids. That’s in comparison to just 16% of parents of the same age in 2007.
The report says that, on average, they have about $1,500 put away for their children’s college education, $500 more than young parents had saved before.
However, despite these good intentions, it’s unlikely Millennial parents will stow away enough to cover all future costs.
“Millennial parents are much more ambitious and optimistic about covering their children’s college costs, but they’re not ahead of the game,” Keith Bernhardt, VP of retirement and college products at Fidelity, told CNN.
5. Their financial priorities are different
What matters to you most – your mobile phone or your car? If you’re a Millennial, it’s probably the former. A study by fund management house Legg Mason found 65% of Millennials say losing their phone or computer would have a greater negative impact on their daily routine than losing their car.
This illustrates how important mobile phones and computers have become to our lives – we use them to ‘get around’ more than we use a vehicle to do so. It also shows that financial priorities have changed. Typically, the value was assigned to big-ticket items, such as a car or a property. It looks as though this is changing, with value moving to smaller items, like phones, that are lower in value but extremely important, even essential.
Millennials looking to get their finances on track can get some expert money-management tips from Trust Deed Scotland.
6. Millennials are moving away from banks
When it comes to traditional high street banking, Millennials aren’t so sure. According to the Millennial Disruption Index, 53% of Millennials don’t think their bank offers anything another bank offers. What’s more, Millennials are much more likely to switch banks than older generations.
The report also illustrates the role of technology in Millennials’ lives. More than two-thirds of Millennial respondents believe that in just five years the way we access our money and make payments will be completely different.
Mobile banking, digital currencies, payment apps like Google Wallet and a whole host of other platforms are rapidly changing the way Millennials get paid, save and spend their cash.
What do you think? Do you agree with this list of ways Millennials differ from previous generations when it comes to their finances? Let us know.