If you’re in your 20s or 30s, you might be coined a ‘millennial’ or ‘Generation Y’ and you’re probably right in the thick of your working career and moving up the ranks – and trust me, you’re a force to be reckoned with. Despite the fact that we’re faced with a rapidly ageing workforce, by 2025, 75 per cent of employment will be undertaken by millennials. And, this got me thinking about the financial sector. Are we prepared for this new wave of prospective clients? If millennials are going to influence employment, earn more money and be the core makeup of Australia’s economy, then it’s worth understanding their motivations, expectations and overall attitude towards finance. What drives millennials? In a country where real estate is expensive and the cost of living is increasing, do they even have the luxury to be picky?
Living life isn’t cheap for this generation
I recently met up with some friends who revealed something to me that I was profoundly shocked by. They admitted, that by the time their eldest of three kids made it to primary school, they had spent over $300,000 on childcare. I’m sure you can see the irony here, the vicious circle – having to pay to have your children looked after, so you can go to work and earn a decent enough salary to make sure your family are taken care of. Something occurred to me after this chat. Many millennial couples – if they want to maintain a certain type of lifestyle – will both have to work. There’s no getting away from this. Living in cities like Sydney and Melbourne are expensive, mortgages are high and services like health insurance are increasing. If you do want to expand your family and private schools are on the cards, it can come with a hefty price tag. It could cost you nearly $500,000 to privately educate your dependants. It all sounds pretty bleak right? So, how are our ‘Gen-y’ counterparts going to get past the ‘millennial disadvantage’?
It’s not all smashed avocados and cold-drip coffee
There’s always been a common misconception of this generation that they’re spenders, flippant with their money and unreceptive towards financial advice. But considering that some millennials are nearing their late 30s, I feel the ‘beanie-wearing-bearded-hipster-living-at-home’ stereotype may need to be shelved. Older millennials are outspending the younger set when it comes to their first home and kid-related costs such as education, and I’m starting to witness a responsible ‘parental mindset’ from these types of clients.
That’s not to say that millennials don’t spend money on dining out, spiced lattes and polaroid cameras, I think we just need to give them a little more credit. According to a report by NPD Group, it’s the younger millennials that are feeling more optimistic about the economy (but then again, you would be at 25, right?). But, is there anything wrong with this? Perhaps, their financial goals are just different from their baby-boomer counterparts? A 2018 study by Schwab found some millennials like to invest in holidays and travel, despite the fact that it could delay their retirement. There’s also the rise of the ‘experience economy’ whereby satisfaction comes from experiences rather than tangible things, and millennials are loving it. Everything from Spanish cooking classes to weekend yoga retreats. Blake Morgan for Forbes explains, “65 per cent of millennials are currently saving money to travel, which is more than the average for other generations”. I don’t see this as frivolous spending – for some, life experiences, investing in personal growth and trying new things will always trump owning property.
Millennials do care about their money
There, I said it. Despite all the chatter, they really do care about their financial future and actually are trying their best when it comes to saving money and building financial security. According to Alex Chalekian for Forbes, “not only do millennials crave financial advice, but many want a real person to deliver it, not a digital alternative” and I would put this need to understand down to necessity. Given the current economic and financial climate, they need to have a better understanding of how to manage their wealth and goals – a survey conducted by US-based fund management company Global X, found that millennials were the most likely generation to seek financial advice following a major life event, two times more likely to source financial advice after getting married, and three times more likely to consult a financial advisor after a large purchase over their older generational counterparts. According to Brian Diessner, the head of sales at Global X, “what this data tells, though, is that millennials are more nuanced in their needs and desires. While some will turn to robots, many have an interest in working with a human adviser to navigate financial markets, and that they feel they need guidance from a seasoned professional”.
Millennials have one thing on their side
As a financial adviser, I would suggest those in their 20s and 30s need to really start thinking about what they want out of life. What drives you? What gives you fulfilment? You’re lucky enough to have time on your hands – something so valuable in this day and age. There’s enough time to save towards short and long term goals, enough time to invest (whether that’s in something tangible like a property or a life-changing adventure) and enough time to plan. If you want to get ahead financially, start sooner rather than later. Whether you want to own a city apartment, launch a tech startup or spend the rest of your life trekking through Asia, you’ll need to plan for it as there’s always a cost involved.
At Talem Wealth, we take a fresh approach to wealth management and financial planning. We respect that everyone’s circumstances and goals are different. If you’re ready to start making financial freedom your lifestyle choice, then speak with us today.