Millennials, Generation Y, the Internet Generation or Gen Next — no matter what you call them, those born between 1980 and 1999 are bursting into the workforce ready to change the world.
No generation has been analyzed and researched as much as Millennials. Considered lazy, narcissistic and entitled, they recently surpassed Baby Boomers as the largest generation in the world and will wield as much if not more influence in shaping the economy. According to Deloitte, by 2020, their aggregated net worth may range from $19 to $24 trillion and their retail spending will hit $1.4 trillion annually. In terms of where they are financially, Millennials are the most diverse of any generation. Someone born towards the older end of the range may be well underway on their career path, own a home and be providing for a family of their own. However, someone born towards the younger side of the range may still be living with their parents, making money by working a part time job or earning a weekly allowance. Regardless of where they fall on the spectrum, our generation’s values are not all that different than any previous.
Given a series of economic and technological factors, Gen-Yers are struggling to land on their feet coming out of school into a world of financial uncertainty. Millennials have had to adapt to a completely different environment than generations preceding them and these differences may have led to the negative stereotypes. Growing up with technology and information at our fingertips changed how we interact with the world and each other. However, our values of trust, autonomy and efficiency do remain a priority.
Millennials are extremely skeptical of the financial industry. Seeing the internet stock bubble burst and Great Recession take major hits out of their parents’ retirement nest egg made them distrustful of the stock market as a whole. As we grew up in the internet age of the 2000s, our Hotmail accounts were hit with the “Nigerian prince” and “distant relative who left you millions of dollars” scams before we even got to middle school. It’s no surprise that Millennials are hesitant to trust just anyone promising them quick and easy returns on their money.
Another reason Millennials are not investing is because of the crushing amount of student debt they are coming out of school with. Americans owe over $1,400,000,000,000 in student loan debt. No, that’s not a typo. That’s a 14 followed by eleven 0’s. The average 2016 college graduate is gearing up to take on the world with $37,172 of debt dragging behind them. In a world where you need to obtain a degree to get a good job, the crippling cost of college is forcing Gen Y-ers to move back in with their parents and not giving retirement planning a passing thought.
In a traditional sense, financial advisory firms advertise themselves as working on long-term financial planning for retirement cash flows, social security maximization, etc. For millennials, particularly our age (early 20s), it is difficult to rationalize putting money into a Roth IRA when they are working on paying off student loans, looking to buy a first home, or even traveling post-grad. Millennials would rather pay for experiences than retirement because let’s be honest, a six-month backpacking trip through Europe sounds a lot more glamorous than monthly contributions to a 401(k).
When they do start investing, Millennials desire to build meaningful relationships with their financial advisors, but also are looking for the simplicity and efficiency provided by mobile apps. Using programs like Robinhood, a commission-free mobile trading app, or Robo-advisors like Betterment is becoming increasingly popular with the generation. This “hybrid” model of investing for Millennials (use mobile apps in addition to personal advising services) is a lucrative foot in the door to the world of saving and investing.
Our perceptions, as interns, about the inaccessibility of personal wealth management have been dramatically shifted since coming to work at APCM. We’ve learned that saving for long-term goals doesn’t mean we have to jeopardize the present life we wish to live. Even though retirement seems like a lifetime away, we’ve both started Roth IRA accounts thanks to the guidance of the financial advisors here at AWMI. They’ve taught us that despite putting in only small contributions annually into our accounts, starting early always pays off. With compound interest and time on our side, the money we put away now will significantly alleviate our anxiety about having enough money to last through retirement without feeling like we’re making sacrifices to our desired experiences today.
Troy Curran & Arina Filippenko
Summer 2017 Interns