MILLENNIALS VS BABY BOOMERS

Imagine being stuck in a world where you can’t ever grow up. A Peter Pan fantasy for many, but instead of the giddy fun of magical fairies and swash-buckling pirates, many millennials nowadays are finding living the fairy tale is more frustrating than dream-like. 

Britain’s millennial generation, those born since 1981, have suffered a bigger reversal in financial fortunes than their Baby Boomer counterparts over the past few years than ever before. * In the Baby Boomer heyday, full employment put money in everyone’s pockets. Most had bought the roof over their head, and if they fancied a quick drink after work, it set them back a magical 35p rather than about £4.80.

Decades of soaring house prices, economic growth and final salary pensions means that 20% of over 65s have become millionaires thanks to their nearly doubling wealth**. However, younger workers have only seen a modest increase, only becoming 9% better-off. **

But why have times changed so drastically? What is the difference between these generations that means the youngsters of today may actually end up poorer than their parents? And what is there available to help millennials ensure they can be as well off as their baby boomer counterparts?

One contributor to the younger generation’s struggles, could be student loans. Only 36% of millennials have not had a student loan as opposed to the 61% of boomers who find themselves educationally debt free, however possibly the biggest contributor to the change in wealth is the runaway rise in the housing market.

This change is forcing many millennials to remain stuck in that “peter-pan limbo” of living with their parents, rather than jumping on the property ladder once education is over. Only a third of millennials actually own their own home, compared with almost two-thirds of baby boomers at the same age, with millennials often being forced to settle for long commutes to achieve affordable living conditions.

Millennials are also paying more each month for housing than boomers ever did, spending over £1,000, which combined with the increases in the cost of living, is proving difficult to cover. ***

But this cost of living is not something millennials are ready to cut back on. The “live in the moment” mindset of millennials, although sometimes materialistic and aesthetically pleasing, means that many now spend for today, rather than saving for tomorrow, arguing that they “may not make it to 65 anyway”.

Millennials are also often reluctant to join any pension schemes, preferring to spend their pennies on their current lifestyle, openly admitting that life is all about enjoying the moment, flying from one event to another. However, there may be a way to ensure that neither the present, nor the future, need to be compromised.

It probably feels a stretch for many to put aside any salary when there are bills to pay, nights out to attend and food to buy. However, every penny really can make a difference, so even as little as £50 a month could bring in more interest than expected.

Products such as an ISA have the flexibility to put aside small amounts of money regularly, or just when we feel more comfortable to do so. Once used to putting a little sum away in an investment account, the doors open to living the best life possible when retirement comes. When the process starts, an immediate appreciation for the concept of long-term saving may not exist, however it will.  As soon as money from the ‘having fun’ account begins to move to the savings account, the savings seed is sown.

Millennials also now work in a completely different nature to their predecessors.  Many hold several jobs over a life-time, rather than building a lifelong career in a company that “takes care of your money for you” but was complex in its processes.
Nowadays, with the ease of auto-enrolment, there is no real reason for people to research and understand a process, meaning the world of pension schemes is perhaps just a little too ‘unknown’ for some. Within these various job roles, low wages are also widespread with two out of five non-graduate jobs now filled by overqualified people with degrees.**** Those who do have the confidence to move around may enjoy a slight pay rise, however the insecurities of “job-hopping judgement” and unknown ventures is causing many to stay put, meaning they receive little, if any, salary rises. 

Changes in the economic climate can mean either one of two things for millennials, however will these be enough to get a generation stuck in “living in the moment” to save for tomorrow?

Becoming aware of future investment choices such as ISAs or GIA accounts could be the solution they have been looking for.

Sources:

*https://www.theguardian.com/money/2018/feb/19/uk-millennials-second-worst-hit-financially-in-developed-world-says-study

**https://www.thisismoney.co.uk/money/news/article-6590611/One-five-baby-boomers-millionaires-wealth-nearly-doubled-decade.html

***http://www.genfkd.org/millennial-woes-really-due-baby-boomer-mistakes-2

**** https://www.bbc.co.uk/news/business-48091971

*****https://www.businessinsider.com/millennials-baby-boomers-financial-behavior-money-habits-2019-4?r=US&IR=T#homeownership-looks-different-for-millennials-nearly-one-third-own-a-home-compared-to-nearly-three-fourths-of-baby-boomers-nearly-half-of-millennials-are-renting-compared-to-less-than-a-quarter-of-boomers-1