MX pointed to mixed signals given by two different reports, an indication as to the complexity of pinpointing the financial lives of younger generations. The Federal Reserve found millennials with much less financially than Gen Xers and baby boomers at the same age: lower earnings, fewer assets, and less wealth. In contrast, Pew Research uncovered millennial households making more than preceding generations at the same age at nearly any time in the past 50 years.
Turbulent economic conditions made millennials more financially savvy and caused them to manage money differently by refinancing student loans, delaying home purchases, and seeking creative ways to earn more money through side gigs.
The MX infographic presented four trends showing how younger generations’ approach to wealth is changing and will continue to change. Here is a digested look:
- Younger generations are reevaluating the way they manage finances. Millennials and Gen Zers observed the economic collapse in 2008 and determined to avoid repeating history. Additionally, with employers scaling back on guaranteed retirement benefits, younger generations are relying on themselves to fund their future. Plus, the realization that government is struggling to fund social security programs and pension plans led them to plan their future differently when it comes to their financial lives. MX maintained with more financial choices and less friction to switch, managing finances is becoming harder than it has ever been in the past. “This, in part, contributes to the lack of financial literacy.”
- Technology makes it easier for people to be perceived as wealthy. MX detected, “There is a greater financial divide now more than ever amongst the younger generations.” while technology has opened the opportunity to earn wealth at a younger age and in a broader assortment of ways, it has also become a negative distraction when it comes to building financial wealth for most people. MX suggested financial institutions can change the narrative. As younger generations continue to become more tech-savvy, it is likely that they will look to financial apps to automate their savings, help them budget smarter, and plan their financial future.
- Women are having a greater financial presence than ever. With more women in the workforce, it seems that not only are women generating and managing an increasing amount of wealth, they are also directing the economy itself—heading up major corporations and pivotal economic players. MX cited several studies to illustrate that point: by next year women are expected to control $72 trillion, 32% of all wealth up from $51 trillion in 2015; 44% of millennial millionaires are women, whereas only 32% of baby boomer millionaires are women; and it’s estimated that by 2030, women will likely account for about two-thirds of U.S. wealth.
- The way people think about wealth is changing. MX said, “It seems that younger generations are less likely to want a large home, they may not even want to buy a home at all. Instead they want to be free and travel.” They are opting out of accumulating material goods and seeking out exploration and experiences instead. MX noted 78% of millennials would rather spend money on an experience than a thing. Another key sign previously, outward appearances, is no longer a relevant indicator as even some of the wealthiest people of younger generations opt for the t-shirt and jeans over three-piece suits.