Let’s talk about… millennials!

The millennial generation don’t always get it easy in the press. As the first generation to embrace the idea of the ‘gap year’ and often being accused of being too fond of an avocado toast brunch to bother to set aside money for savings, millennials are statistically behind the curve in building wealth compared to previous generations.

First of all, let’s start off by defining who we mean by ‘millennials’. Not to be confused with their predecessors generation X, or their follow-on cohort of Generation Z, the generally accepted birth dates for the millennial generation – otherwise known as Generation Y – fall between 1981 – 1996. At publication date, the age range of millennials is between 22-37 years old, making them arguably the most influential group in the current labour market.

Despite their aforementioned reputation, research shows that the millennial generation are in fact financially worse off than the previous generation through no fault of their own. A recent study by the Institute for Fiscal Studies (IFS) found that those born in the 1980’s experience lower pay and have an average of 20 per cent less wealth than those born in the 1970s, primarily due to their lack of home ownership. This is the first time that a generation has been found to be worse off than their predecessors since the Second World War.

The rapid increase in property prices has a lot to answer for and it’s no surprise that Millennials are sometimes also referred to as ‘generation rent’. Figures from 2018 show that a first time buyer would need 5.2 times their average salary to purchase a home – a huge leap from 1993’s figure of 2.3 times. Even those that have been able to make it only the property ladder unlikely did so on their own – with statistics finding that 62% of under-35 homeowners were helped financially by family and friends to buy their home in 2017.

On a positive note, with the advent of auto-enrolment, millennials are accustomed to pension saving.  Statistics show that 80 per cent of eligible employees born in the 1980s are already saving into pensions in their early 30s, significantly up from the 50% of people born in the 1970’s who were doing so at the same age.

However, the dynamics of employment have undergone a significant shift over the past decade. The nine to five job isn’t necessarily the norm anymore, and a growing number of young people, including millennials, are undertaking jobs on a more flexible basis – either through necessity and the rise of the gig economy, or else by choice with the growing army of freelancer or micro-business owners. This changed housing and labour market means many young workers risk not saving enough for the future.

So what is the answer?

Unfortunately for millennials, it seems to be a case of poor timing so far as long-term financial stability is concerned. Many of the reasons generation Y aren’t as able to build up wealth as easily as previous generations are as a result of economic activity and wide-scale shifts in the labour market; therefore falling entirely out of their own control.

Perhaps one shift that may prove of long-term benefit is the tendency for millennials to be more open about money and financial matters. According to a study we caught sight of recently. 30% of millennials share financial info with their friends, compared to just 9% of baby boomers (aged 55 to 73 in 2019). When it comes to sharing their finances with family, millennials are also more likely to do so, with 46% talking to their parents about money matters. If talking about money does one thing, it helps others become more financially literate, so hopefully this is a sign of a more informed approach to financial management for future generations.

Over recent years, there has been a wave of fintech developments, including micro-saving and investment apps, which are largely aimed at millennials and generation z. Although the existence of such tools won’t change a generation’s ability to save on their own, they are at least a step in the right direction, especially for those taking their first steps into the world of long-term saving.

Applying sweeping generalisations isn’t often helpful, or accurate. However, there is something to be said of the millennial generation’s attitude to money. The growing tendency to favour experiences rather than possessions is, to an extent, something to be applauded – perhaps even something that other generations might benefit from. Although financial security has a value that you can’t put a price on, the same could also be said for enjoying life. Although inflation and economic pressure won’t make it easy, perhaps finding a balance between the two really is the ultimate goal.