Busting the myth that Millennials are ‘financially reckless’
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Millennials dreaming about their inheritance and how they intend to spend it are planning to top up their pension pots to boost their income in retirement.
This is the key finding of a survey into the spending habits and plans of the Millennial generation otherwise known as Gen Y, that is people born between 1981 and 1996.
A massive 71 per cent of the 24 to 39-year-old age group intend to bolster their pension savings if they receive a windfall sum, according to independent financial advice firm deVere Group.
“Millennials are often falsely stereotyped for their sense of entitlement and thought to be more financially reckless than other generations,” deVere Group founder and chief executive Nigel Green said.
“But with seven out of 10 saying their number one priority of the inheritance boom is to top up their pension pots, this myth is busted.”
In the context of Australia, any intention of Millennials to boost their retirement fund implies they will plough more cash into the superannuation system and the stock market.
There has been an influx of retail investors into the stock market during the pandemic, with a large cohort being Millennials.
ASX companies are therefore likely to see more demand for their shares.
Millennials are set to be the beneficiaries of one of the greatest wealth transfers in history in the next decades as asset-rich Baby Boomers sail off into the sunset.
“According to some estimates, $US68 trillion in wealth is to be passed down from the Baby Boomers – the wealthiest generation ever – to their children and other heirs over the next 30 years,” Green said.
“It is set to be the biggest-ever wealth transfer in modern history,” said the boss of deVere Group, whose clients hold a combined $US12bn in investments.
The size of the intergenerational wealth transfer is about three times that of the US economy.
Other main priorities for this age group include increasing their savings in sustainable investments and buying a property.
Other financial advisers are aware that Millennials stand to benefit from windfalls from older age groups in the years ahead.
Bombora chief investment officer Gregg Taylor said the coming wealth transfer was “changing all aspects of commerce”.
“The trend is real and is happening now, though it’s very much expected to be ongoing,” he said.
“The growth opportunity should be significant for the next 10+ years for well positioned and managed companies.”
But the wealth outlook for the Millennial generation may be clouded by reports that many have had to dip into their retirement savings to pay for living costs now.
Over 3 million applications have been made by Australians to withdraw sums from their superannuation accounts since March under the government’s economic hardship scheme.
Estimates are that 23 per cent of Australians have accessed their superannuation early, according to New Industry Super Australia.
The amount of superannuation money withdrawn is projected to reach $42bn, it said.
Members of the Millennial age cohort patiently waiting for an inheritance have had to contend with high house prices and slower wage growth than previous generations.
deVere Group’s Green said an inheritance windfall from the richest generation in history will be welcomed and needed by Millennials – but he had some words of caution.
“Waiting on a windfall should not be anyone’s plan A – it could come too late and other circumstances could make this a financially dangerous plan,” he said.
Better to save and invest for the future at an earlier age through a financial plan, as it will be easier to reach long-term goals this way, according to Green.
The survey covered 664 adults from a range of countries and regions, including North and South America, Europe, the Middle East, Africa, Australia, India, East and Southeast Asia.