What can millennials teach us about money?
Beyond avocado toast, finance expert Ted Richards takes a closer look at some of the big money lessons we can learn from millennials.
Millennials are often maligned when it comes to money (full disclosure: I'm a part of this generation!).
This is partly because the perspectives of people born between 1981 and 1996 differ in many ways from their parents. But being different doesn't mean being wrong – and millennials can teach other generations a lot about money.
Think about the unique financial environment in which most millennials have grown up. At a young, impressionable age they lived through the GFC (2007-2008), the largest financial crisis since the 1930s.
On top of that, a lot of them work for themselves or have side hustles (or at least, don't follow the traditional working model and career flow) and, as a result, many don't have access to employer contributions to superannuation. And, of course, they have grown up with the Internet, which has disrupted everything from retail and banking to how we live our lives through our phones.
All of this has shaped the millennial generation's concerns, thinking and strategies when it comes to money. So, let's take a look at some of the valuable lessons we can learn from millennials about finances and investing.
Australians haven't always been quick to embrace new money technologies. For example, back in 1980, the Commonwealth Bank began installing ATMs that initially only operated from 7am to 11pm. By 1982 (around the same time the millennial generation was emerging), still only 12% of its customers were using the new system.
But things have changed rapidly in millennials' lifetimes. Australians went from not trusting ATMs to using them constantly and, today, many millennials don't use cash at all.
According to research by AlphaBeta (commissioned by Afterpay), almost 1 in 3 millennials now use online tools to track their spending and 7% use budgeting apps. Meanwhile, 72% of millennials research on the go before they spend, compared with 28% of older Australians.
It's not surprising that millennials use a lot of technology to simplify and automate many aspects of their lives, finances included. This generation is becoming less reliant on meeting face to face with accountants, brokers and financial advisers.
They achieve this by automating their bill payments, using cloud-based accounting solutions like MYOB/Xero for invoicing and payments, and using online investment (or "robo-advice") to invest.
This gives them (and anyone else) access to their own investment portfolios without the need to visit an adviser or speak on the phone with a stockbroker, as generations have done in the past.
In addition to simplifying processes, these digital options also tend to cost less than their traditional counterparts.
Be cautious and steady
Millennials are often stereotyped as spending for today with no regard for tomorrow, but this is certainly not the case for all millennials.
A portion of this generation is seriously bucking that trend by being surprisingly thrifty with their money. This is evident with the rise in popularity of the Barefoot Investor's books and concepts like FIRE (Financial Independence Retire Early).
They may prefer emerging neo-banks like Up Bank instead of the traditional banks their parents banked with their whole life. They want transparency without the high fees, slow transactions, conflicted banking models and expensive exchange rates that have been accepted as a norm in the past. They also value engagement and greater user experience.
Podcast: Ted Richards on the risks of emotional investing
Look outside the square
Unlike their parents' generation, millennials are very open-minded when it comes to how and where they invest their money and don't always follow the "traditional" path that prioritises home ownership.
According to a 2019 Deloitte report on millennials, of all the generations before them and even the one coming after them (Gen Z, born 1995 to 2002), millennials are the least likely to buy a home.
Older Australian generations typically have a large "home country bias" to their investments, often investing only in Australian property and Australian "blue chip" shares like banks and mining companies.
But millennials invest internationally. They're aware of the benefits of diversifying and the growth opportunities in overseas markets.
Sure, there's some who are happy to speculate on crypto-currencies but many like to find safe, long-term options that allow their money to compound steadily over time.
Change is constant
There's a Japanese word, mujō, which means "impermanence". It's derived from a Buddhist teaching that all things within our lives and our world are constantly changing. It's important to remember that nothing is permanent.
It's easy to criticise each generation for its values, characteristics and quirks – but if you take a moment to reflect, there are similarities and learnings that can be taken away from every generation.
Just as embracing the ATM started out slowly, banking and investing have changed and are continuing to evolve. These advancements are inevitable and millennials are often the early adopters first to embrace change, a change that is helping improve their financial situation.
Disclaimer: The views and opinions expressed in this article (which may be subject to change without notice) are solely those of the author and do not necessarily reflect those of Finder and its employees. The information contained in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort. Neither the author nor Finder have taken into account your personal circumstances. You should seek professional advice before making any further decisions based on this information.
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