Since the creation of this cohort, millennials have been perpetually scolded for their perceived unhealthy financial habits.
Critics argue that this group is an entitled bunch of constant pleasure-seekers who sacrifice long-term financial security for short-term luxuries. Many pile up debt by living in pricey cities with low paying jobs that have minimal upward mobility.
While the criticism may not always be valid, there is no doubt millennials are in a pinch. According to The Economist, those under 35 have, on average, just $35,000 in assets (far below the $100,000 most financial advisers suggest people should have by this age). Those born between 1981 and 1996 own 7% of all assets. This pales in comparison to the 26% of the pie baby boomers owned when they were of similar age. A report by the think tank New America revealed millennials earn 20% less than baby boomers did at their age.
But there are early signs that the pandemic has motivated millennials to be more proactive about building a healthier financial future.
For starters, new technology has galvanized greater interest in investing. Trading platforms like Robinhood and robo advising apps like Acorn have made investing and saving cheaper, easier, and more fun. The pandemic has only amplified interest as more than half of millennials say they have been trading more since the start of the pandemic.
Secondly, as millennials age they are becoming more astute with their spending choices. As many reach their late 30s and early 40s, they are taking more financially secure positions, forgoing the start-up life so many younger millennials gravitate towards. Further, even before the pandemic, many big city couples fled metropolitan life, seeking the quiet comfort of the suburbs with no desire to come back. COVID-19 has only accelerated these shifts in professional and living choices.
Third, millennials will soon have more to pocket. By 2030, this group is expected to inherit over $68 trillion from their parents. Those already getting money passed down have indicated they are looking to pour their cash into sustainable and ethically sound ventures.
COVID-19 has only hardened millennials’ commitment to investing into socially and environmentally friendly companies. In 2018, a Nielsen Global Sustainability report found 54% of millennials would pay more for a socially responsible fund. Today, 74% said they would do so.
This is also financially wise as socially responsible investments have been outperforming traditional funds over the past year and copious amounts of research indicates they are likely to continue to do so.
Millennials will face many challenges with their new belt-tightening goals. They are still woefully underprepared for retirement, let alone surviving an emergency or building a family. Those residing in cities would be in a dire position if they became unemployed.
Experiencing two recessions in a decade has set-back many far behind in their professional journey. Many may never be able to recover from it. Moreover, those who retreated to the suburbs may see their wages slashed and prospects for upward mobility limited. It also remains a question if millennials will continue to be disciplined with their wallets when the impact of the pandemic subsides. Nor would it be realistic to think this group will be as financially secure as their elders who for many decades enjoyed steady economic growth, fat pensions, job security, and rising asset prices.
Nonetheless, there is reason to be hopeful. Financial planning companies and asset managers will have to create more saving and retirement options for millennials if they continue to show greater interest in their fiscal future. Corporations will have to beef up their retirement packages to secure top talent and remain competitive. In the end, the short-term pain of the pandemic might have saved so many millennials from long-term financial ruin.