Much is written in and outside of our industry about the Millennial generation or Gen Y as they’re sometimes referred. More than 80 million strong, Millennials are those Americans roughly spanning the 15-35 age range, depending on who you ask.
If you believe all the sound bites and anecdotal evidence, all 80 million are entitled, lack direction, have moved back home, spend most of the day texting or Tweeting and are shoulder deep in your fridge foraging for last night’s leftovers right now!
The truth, as is the case with every generation, is their interests, behaviors and patterns vary widely. Many are finishing school, starting businesses, families and, as a whole, are rapidly becoming a greater economic force than their boomer parents.
When it comes to personal finances, Millennials received very clear early messages about the markets and investing. Whether through the tech bubble that kicked off their namesake millennium or the great recession that brought it’s first decade to a close, they quickly learned markets move in both directions, and sharply. Many argue this has led to a generation of very conservative investors that, over the long run, could be too conservative for their own good.
I am what is known as a Tweener. No, that doesn’t mean I listen to Justin Bieber and say “O-M-G” a lot. It means my age defines me as straddling two generations; in my case, X and Y. While it’s tough to speak for a club of 80+ million of which I am only a partial member, I do want to address the dangers behind this conservative investing streak as I see them a little differently.
The pitfalls aren’t solely around conservative investing. It’s that tendency paired with a general apathy for personal finance and an expectation of taking less risk while living well above the current standard that’s the real danger.
These expectations, fueled by constant reminders of the excesses of wealth displayed by many an athlete, entertainer, faux reality celebrity and big company CEO, do not line up with an outsized aversion to risk.
No matter the generation, the fundamental relationship between risk and return remains constant. If you want to achieve great rewards, it means taking on bigger risk. If you want to succeed financially, it means putting in some time and effort just like the generations before you.
To the Millennials, maybe even more so.
You won’t have a pension. No one is going to force you to save the right amount in your 401(k) or make the investment selections for you without some initiative on your part. Social Security might be there in some form, but what that looks like is anyone’s guess.
You’re on your own. You’re scared of risk. It’s all completely understandable.
You can’t both “have it all” and never take a risk. Neither is likely the appropriate goal. If you decide to invest, the only guarantee is that markets will go up and markets will go down. But ignoring the need to get started with some kind of planning for your future is nothing short of guaranteed failure.
So, where do you begin?
Financial advice for the masses can be a dangerous thing, but this article from The Huffington Post is a great place to start, covering the bare essentials that all Millennials should have locked down by the time they reach age 40.
Financial Planning is no longer just something you do a few years away from retirement. It’s not a door stop presentation filled with expensive investment decisions and market babble. It’s an ongoing process of conversations about your values, your resources and your life that’s best started as soon as possible.
Our goal at TAAG has always been to help successful individuals and families have those conversations, filter the good noise from the bad and help you make the best possible financial decisions to meet your needs.
As the next generation takes on its own challenges, one of them will undoubtedly be wrestling with their financial lives from an early age. For those looking to do so with a fee-only, independent planner, let’s start those conversations now.
Have a great week!
Note: I will be blogging more from time to time about how each generation relates to their finances. Much of this post has been inspired by recent conversations with fellow Millennials, but also in part from a session at a recent FPA conference led by Cam Marston of Generational Insights. Cam is the leading expert on generational change and its impact on the marketplace, a best-selling author and has appeared on just about every major media outlet you can imagine. If this subject is of further interest to you, I highly suggest looking into Cam’s work.