The millennial mindset: A financial perspective

Many words have been used to describe millennials (ages 21-36); lazy, spendthrifts, entitled, narcissistic e.t.c. But research conducted by UBS of over 1000 millennials shatters these stereotypes. The study shows that millennials are extremely conservative and not nearly as self-obsessed as one would expect. And they worry about their parents financial
health and futures as much as they worry about their own.

Millennials attitudes towards money, risk, and success have been shaped by two unprecedented phenomena:

  • Access to lightning-fast technology innovation and
  • Dramatic economic and market volatility that constrained their job prospects and earning abilities, as well as disrupted their parents real estate values, investment portfolios and retirement savings.

These millennial investors are also ver conservative as they tend to save money in cash rather than invest that money. While many of these millennials are optimistic about their abilities to
achieve goals and their financial futures, Millennials seem somewhat skeptical about
long-term investing as the way to get there. There could be many ways, such as crowdfunding for real estate investors who cannot raise enough capital on their own, so they merge together with other investors, crowdfunding platforms can be easy to find if you look around for them, such as this Fundrise vs RealtyMogul overview. This could be a good way for skeptical millennials to learn more about investing their money for the future.

Below, we look at what has shaped the next gen investor to be so conservative and we delve into the mind of the next leading generation

1) Millennials have a highly conservative mindset due to the financial crises.

Millennials experienced the financial crisis and all the market volatility and job security issues that came with it early in their careers. This has had a significant impact on their mindsets.

Of the 1000 millennials studied, their risk tolerance is as follows: 5% are aggressive, 24% are somewhat aggressive, 36% are moderate, 21% are somewhat conservative and 13% are conservative. Millennials are the most conservative generation.

If Millennials risk tolerance is conservative, their average asset allocations are extremely conservative. Millennials hold more than half of their assets in cash (52%), with less than one-third of their assets (28%) in equities. This is directly counter to traditional long-term investment allocation advice.

This very high cash allocation to cash reflects a millennials wariness of the market and long-term investing

83% of Millennials are not trying to outperform the market as they are planning to take the long term approach and this adds to their conservativeness.

2) Millennials define success based on relationship, financial and experiential factors

While passed generations defined success as being measured by financial and career terms, Millennials, have expanded this definition to include financial, emotional and experiential factors.
Although a strong financial component remains, particularly having financial freedom, the most important factors are emotional/relationship-based, particularly having a happy family and having a deeply meaningful relationship with ones spouse/partner.

3) Millennials are focussed on personnel success as opposed to chasing higher returns.

A significant portion (24%) of millennials focus primarily on how they are doing compared to their goals, rather than compared to the market

4) Millennials are skeptical of long term investing as a way to achieve success.

Millennials views on how to achieve success help illuminate their mindsets toward long-term investing. While all generations view working hard and saving/living frugally as key factors for achieving success, Millennials are most likely to have this view with seven out of 10 believing working hard is a top factor. In contrast, while the majority of investors from other generations believe long-term investing is a key to achieving success, only 28% of Millennials do. With Millennials having less faith in long-term investing, they plan to work harder and save more to reach their goals.

In addition, Millennials are the least likely to invest new money, with only 12% saying that they would do so, compared to 33% of investors of other generations. Instead, Millennials prioritise paying off debt, as they are likely burdened with university and college loans. Millennials perspective on long-term investing is likely based on seeing the impact of 2008 on their parents long-term investments, as well as being accustomed to instant gratification in the Digital Age.

5) Millennials rely on family for financial advice.

While most Millennials do not have a professional financial analysis advisor, that does not mean they are self-directed; in fact, only 9% made their last key financial decision without consulting someone. More than any other generation, they look to their spouse, their parents, and to their friends for financial advice, and then make a decision based on this input from multiple sources. While some do research online they are actually no more likely than other generations to use online sources for key financial advice. They are also equally likely to turn to financial seminars and other financial marketing opportunities to learn about financial matters.

Millennials are most likely to seek advice on real estate, other major purchases and investments as well as when a decision could have a large financial impact affects more people than just themselves and where they feel they have a lack of knowledge. They will also shop around to find appropriate solutions to their woes. For example, if a millennial is looking for a new home, instead of speaking to one estate agent, they’re likely to speak to multiple agents and even use online resources like to get a better understanding of the housing market and get all of the knowledge they need to make a well-rounded decision. In seeking out a new advice source, they most value experience, trusting the person, and recommendations from friends and family. Millennials actually worry more than other generations about getting good advice to help reach their financial goals and knowing if they can trust the advice they receive.

Millennials most value the financial advice they have received about the importance of saving. When asked qualitatively to describe the best financial advice they have been given, the most common theme by far is the general value of saving, followed by living within your means. Additionally, many Millennials cite concepts, like spend wisely, save for retirement, save early, limit debt, save emergency funds and a penny saved is a penny earned.

This stands in sharp contrast with other generations who frequently say that the best financial advice they received was about investing. While saving and investing are traditionally viewed as equal partners in building wealth, it seems for Millennials, with their risk-averse mindsets coming out of the financial crisis, as well as the advice they are getting from others, saving has become paramount.

Respondents of the survey state that the best advice they received about money and finance was:

Save Early
Spend Wisely
Save Emergency Funds
Save for Retirement
Live within your means
Health is more important than money
Cash not credit
Limited Debt
Pay yourself first

Millennials are the future. they are the leaders of tomorrow. The first of the Millennials will reach their peak earning power in the next few years. Look at this article too see how they are investing in order to spot tomorrows trends today

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