In the next few decades, there’s a big change coming in how much money Millennials will have.
In the world of money matters, Millennials, just like any other generation, have a unique set of challenges and chances. Born roughly between the early 1980s and the mid-1990s, they’ve dealt with a lot of changes in the economy, new technology, and how society thinks about money.
The FIRE Movement (Financial Independence, Retire Early) has been particularly popular among millennials. This movement promotes aggressive saving and investment strategies with the goal of achieving financial freedom at a young age. Followers of the FIRE Movement generally aim to save up to 75% of their income, enabling them to retire in their 30s or early 40s.
A recent study by Schwab found that Millennials want to retire around age 62 on average. That’s younger than what older generations aimed for. But even though Millennials want to retire early, they think they need a big chunk of cash, about $1.8 million, to live comfortably. This shows they really want to be financially independent and not have to rely on a regular job forever.
What makes Millennials different is how they choose to invest their money. A huge majority, 75%, say they pick investments based on what they believe in, like companies that care about the environment or social issues. This means they’re into what’s called “socially responsible investing,” where they think about how their money can make a positive impact.
The growing trend of socially responsible investing among Millennials, who make up the largest adult population (1.8 billion), is changing the investment world. Investments that focus on things like the environment and social issues are expected to grow a lot, and by 2025, reach $50 trillion. And Millennials, as you may have guessed, are big fans of exchange-traded funds (ETFs), which are investments that follow certain guidelines about social and environmental stuff.
When it comes to putting money away for the long term, Millennials really like real estate. They feel it’s a safe bet because it’s something they can see and touch. And they’re also interested in the stock market; well… at least 30% of them. And for those who do:
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One interesting thing, though, is that Millennials aren’t as scared of the stock market’s ups and downs as older generations are. But some of the older Millennials, those aged 33 to 41, are a bit nervous about it, so they might need some help understanding how it works.
Millennials see the stock market differently too. Many of them think it’s rigged against regular people like them, which shows they don’t completely trust big financial institutions. They want things to be more open and fair.
A lot of Millennials start investing through retirement plans they get from work, like 401(k)s. This gets them used to the idea of investing early on, which is important for building wealth over time.
But even though Millennials are making progress in saving money, they still have a lot of tough stuff to deal with.
One trend that stands out among millennials is what some call the “Avocado Toast Syndrome“. Avocado Toast is a term used to describe the perception that millennials tend to spend money on luxuries rather than saving for the long term. Ever since the rise of the subscription economy, many of them have been facing constant temptations to spend on non-essentials, contributing to a culture of instant gratification.
It goes without saying that many of the millennials were young and inexperienced during the dot-com bubble, and fell prey to a fear of missing out (FOMO) as well.
Yes, the student loan debt crisis has also had a significant impact on millennials. But while it may seem like student loans are their primary source of debt, recent surveys indicate otherwise. According to Northwestern Mutual’s 2019 Planning & Progress Study, millennials had an average personal debt of $27,900, excluding mortgages. It’s mildly surprising, though, that credit card bills are the leading source of debt for millennials, contrasting with mortgages for Gen X and boomers, and student loans for Gen Z.
Buying a house, finding a stable job, and dealing with the high cost of living are big challenges for many of the Millennials. The idea of the “American Dream,” where anyone can succeed with hard work, seems harder to reach for a lot of them.
However, there’s a big change coming in how much money Millennials will have. They’re set to inherit a whopping $90 trillion from older generations in the next couple of decades. This could change a lot about how wealth is distributed, but it might not be fair for everyone.
Some Millennials will benefit a lot from this inheritance, but others might not get as much because of things like inequality and not having rich families. Plus, the way people make money is changing too. Things like buying a house aren’t as straightforward as they used to be because of different economic factors.
While Millennials are doing their best to save and invest, they’re also facing a lot of challenges that make it harder to get ahead financially. But with some luck and smart decisions (and approaching inheritence), they might just be able to make it work.
