Millennials are a hot topic in the media and often get a bad rap. Described as people who were born after 1980 and often referred to as the “me” generation, Millennials are characterized by their social savviness, laziness, desire for instant gratification, and are often considered narcissistic, yet open-minded.
Millennials were coming of age during the Great Recession of 2008, causing an influx of young people to move back home because of rising student loan debt and an inability to find stable work. A common trend for Millennials is to delay common rites of passage such as marriage, having kids, and homeownership, instead focusing on their careers and getting their financial lives in order.
Because of Millennials’ unique upbringing as well as the economic circumstances surrounding their early adult life, they have become a generation of savers and are creatively shaking up money management and doing things their way — in several surprising ways.
Here are 3 ways Millennials are shaking up money management:
1. Millennials are Saving for Retirement More Than Previous Generations
Millennials saw their parents’ retirement accounts dwindle to frighteningly low levels and have responded to that by starting their retirement funds early.
A recent study from the TransAmerica Center for Retirement Studies found that 70% of Millennials have started saving at the ripe age of 22 and roughly the same percentage of Millennials have opted-in to their 401(k) plans at work.
2. Millennials are Saving More as Whole
While Millennials are saving more than their Gen X and Baby Boomer counterparts, the gender pay gap is still present, which is also affecting saving levels. A Bureau of Labor Statistics study found that women ages 16 to 24 earn just 89% of what their male counterparts make.
Because of the wage gap, 26% of men are saving ten percent or more of their income compared to 9% of women saving at the same rates. Over 50% of female Millennials surveyed are only saving 1-5% of their income.
3. Millennials Fuse Technology and Personal Finance
Millennials grew up in the age of the internet, and social media is practically second nature to them. Millennials’ aptitude for digital technology and social media has completely transformed the way they live their lives. Everything is connected — the internet is ground zero.
From dating, to ordering food, and downloading movies and music, Millennials are accessing technology and using it for nearly everything — including their money.
Millennials are accumulating wealth and managing their money using the latest and greatest in technology. Recently, there have been a number of personal finance oriented startups created by Millennials or targeted at Millennials ranging from everything from investing, paying off debt, managing retirement funds, and offering personal finance advice. According to a recent Forbes article:
“Over the past three years, according to CB Insights, more than $1 billion has been sunk into tech-driven personal finance companies–a whopping $261 million in the second quarter of 2014 alone–with a special emphasis on startups targeting young investors, complete with the user-friendly, low-cost, mobile-enabled features they crave (social responsibility is a plus, too).”
These startups are making personal finance more akin to video games than esoteric number crunching, making them easy-to-use and generation-friendly. Here’s a short list of money management startups offering tools and resources for Millennials.
- Upstart – a unique lending platform that allows you to obtain unsecured funding through fixed rate loans. Upstart considers more than just your credit score, they consider your grades in school, area of study, school attended, and employment history, thus looking at a more comprehensive picture.
- Wealthfront – a wealth management system with an emphasis on asset allocation with low fees. It’s based on Modern Portfolio Theory (MPT) and they believe the optimal mix of asset classes is more important than security selection.
- SigFig – a free personal finance service that gives automated investment advice on how to save money and uncover costly mistakes.
- FutureAdvisor – an online investment advisor that can automatically manage your investments, with a low fee.
- ReadyForZero – a web-based application that offers debt management tools and resources to help you get out of debt.
- LearnVest – an online tool that helps create a personalized financial plan and pairs you up with your own LearnVest Planner.
The Bottom Line
Millennials are a driving force in personal finance and are accruing wealth at a rapid rate thanks to their saving ways. While they may have gotten a late start in some regards, the economic crisis has taught them to be creative with their money, life, and career, as well as instilling a penchant for saving.
Most Millennials have little trust in the government to bail them out, especially when it comes to Social Security. As Millennials continue to save, while creating and participating in new technologies, the wealth management frontier will continue to shift and evolve in new ways.
This oft-criticized generation is putting their savviness and selfishness to use: by investing in themselves and their future.