Each generation has had its money issues. Baby boomers were able to take advantage of thriving economies after World War II, buying into the dream of home ownership often as early as in their 20s. They bought things for the house as they could afford them. Credit wasn’t as easily available as it is now.
Gen X, now aged between 41 and 57, faced high interest rates, recessions, and tough job markets.
It’s millennials’ turn in the spotlight. Now facing life’s big decisions, they’re likely to be in the throes of buying their first property, having children, and starting on their journey of accumulating wealth.
Here we look at what steps digital-savvy millennials are taking to overcome the challenges and thrive.
New set of challenges – and opportunities
According to economist Nicki Hutley, millennials have different economic and financial opportunities and challenges from previous generations. “This is the first generation that is likely to be less well off than predecessors, due to relatively slow wages growth and the ridiculous speed of house price increases.”
There is a bright side, though. Employment prospects are better in many ways.
“Tertiary education has increased, so opportunities and skills have increased. People can move into higher paid work if they have that advantage,” says Hutley.
Real wages have stagnated, so the standard of living is not improving for millennials at the pace it did for many boomers and that affects long-term investing prospects and retirement.
“The issue of housing affordability is the biggest challenge,” she says. “The latest statistics show that for under-35s, the rate of homeownership has halved. It’s down 4% across the board and many millennials believe they’ll never own a house, which doesn’t matter as long as they have other avenues of investing and tenure in renting – but in Australia, that’s pretty poor.”
Many millennial kids live in “shoeboxes” to be close to work and avoid commuting, says Hutley. “The range of so many employment opportunities doesn’t extend beyond the two major cities. The concentration of the servicesbased economy is in NSW and Victoria. If you want to work in certain sectors, you have to work there.”
However, there are options for acquiring that “forever” property: buying an investment property, investing in shares and other assets and reinvesting have all become more popular.
Millennials are challenging the status quo and changing the investment landscape.
Bianca Hartge-Hazelman, chief executive of Finance, which aims to empower women, says millennials have benefited from the financial awareness of the baby boomers, including the need to be financially independent.
Hartge-Hazelman says millennials are the “woke” generation. “They’re awake to social issues, to what is right and fair. They have a platform to voice that, and they’re aware of financial products that allow them to invest in that way. They know they can have an impact by investing in favor of climate change issues, or a digital currency that can disrupt major currencies.
“There is a major disruption to major ideals. It’s not totally unique, but this generation has a really loud platform to execute on it and bring more and more like-minded individuals together. They really are a force to reckon with in terms of investing, and there is a need to tailor products that will resonate with them,” she says.
“What is missing is something that allows them to invest in property like many of us have before. In many ways the property boom that gen X and boomers grew up with is at risk of dying for millennials. There’s a level of ‘I’m not interested in that because I can’t get into it’. They’re having to change the way they do things to make it work for them instead of fitting into the status quo – it’s the products and people who are clued into that who can move with that opportunity,” she says.
At the same time, significant changes in technology mean their investment mechanisms are easier, faster, and more flexible.
“There’s an increase in social media of how to do things on your phone,” says Hartge-Hazelman. “You no longer need to engage a broker to invest in shares, making it more affordable to get into the market. It’s not just the platforms, but the type of products available – the Bitcoins and Dogecoins can provide cash windfalls if you get in on the right side.”
Power of the “finfluencer”
In the wake of social influencers, we’ve seen an increase in financial influencers or “finfluencers”.
“Some of these finfluencers have thousands of followers and some of the questions are quite basic, but a lot of people are getting the answer they need and that’s good enough to make decisions for many of them,” says Hartge-Hazelman.
Financial adviser Victoria Devine started a Facebook group, She’s on the Money, in 2017 because she noticed women had a lot of questions about money but were too afraid to ask anyone.
“Money was a taboo topic that was ‘unladylike’ and I wanted to change that,” she says. What started as a network of people she knew personally quickly grew as they added their friends and those friends added their friends. There are now more than 180,000 people in that community. “I think millennial women are an incredibly engaged cohort of investors. They’re ready to take control of their financial future and they know a partner is not a financial plan,” says Devine.
“This generation of women is incredibly smart, driven, and fiercely independent and they are hungry for the flexibility and comfort that being financially free will afford them. They’re eager to learn and they’re making the most of the wealth of information that wasn’t available to previous generations. Plus micro-investing has entered the game and that’s a really hands-on way of teaching people the power of investing.”
Devine also has a podcast, launched in 2019, which demonstrates her great influence in the millennial market. Her audience is most interested in getting better at saving, creating a budget, and starting to invest.
TOUGH CONVERSATIONS WITH A BOYFRIEND
Michelle Stanley, 29, radio presenter
Michelle has become focused on her finances in the past couple of years. She’s bought an investment property, found a partner and moved up the career ladder.
Although she says she’s always had financial awareness, she didn’t have a grasp on personal finance. “I thought living within your means was living within your income, not living with what you need,” she says.
But when she started seeing her boyfriend, John, she had to become more serious about money.
“My boyfriend sat me down and said financial security was important for him and he wanted us to be compatible. He was so savvy and I was so embarrassed. He was only one year older but was so much more organized,” she says.
“He was always saving, paying himself first and making sure he had a goal of what he wanted to save and then making the rest of his expenses fit. Instead, I thought I’d spend what I wanted and save what was leftover. I thought I had enough money in the bank to fund my lifestyle but wasn’t very future-focused.
“We had to have a few days to see if we were compatible. He had so much money in the bank and in shares, and I had debt for a car and I only had a bit in my savings. We had to see how it would work. He’s in a well-paying job, he was building faster than I ever could. So it strained the relationship at first, and it still does. There are still things that come up – like buying a house together – because we won’t have the same input, but he’s a strong believer in earning your keep and share, and not paying for someone else’s decisions.
“When we talked about it, he was in the frame of mind that if I was happy to try and work on my situation, he’d be comfortable with that even though I would never have the same amount of money. I became more mindful in tracking spending and thought more about did I need what I was buying. I changed everything and saved so much money.
“I was no longer the young person traveling and living day today. I had to start realizing I was almost 30 and if I wanted kids I needed a stable life and a home, and that maturity all came at the same time.” Michelle already has an investment property with a mortgage, but priorities in the next few years are traveling and perhaps a home and family.
“He [John] has money to be able to take a year off and travel for a long time and I don’t, but we want to travel together. Longer-term I’d say [goals are] buying a house and how we can do that together or not.
Michelle also has a few shares that are managed by her dad. “I’d like to invest more but it’s such a hot market,” she says.
Michelle wants to know more about insurance. “I’m hearing so much about super, shares, and ETFs but in my situation, coming up to 30 and thinking of a family, I’d like to know what I need to be insured for and not just dropping money into an insurer’s account where I’d never get anything.”
So, what worries them?
Former financial adviser Glen James now works full time as a influencer through his My Millennial Money podcasts, which he started in 2018. This was the first financial advice podcast in Australia – by Aussies for Aussies.
According to James, his listeners’ top five issues are: investing in a share portfolio, buying a first home to live in, buying an investment property, getting a cash flow and spending plan under control, and wanting to increase income.
“It’s the generation that wants it all – and knows what ‘all’ means,” he says.
James says his audience wants to be given the tools to do it themselves. “They want to know how everything works, how we research it. They want to see under the hood of available options.”
He says the purpose of his podcast is to get people to a point where they are ready to see an adviser, get out of consumer debt, have an emergency fund and maybe dip their toe in the investment waters.
James left his own business two years ago because he wanted to provide advice to more people. “I hit some of my own personal and career goals in the financial advice industry and wanted a new challenge,” he says.
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