When it comes to finance, millennial behaviours differ significantly to that of previous generations. The reality is, we’re facing a lot more difficulties when it comes to building wealth than our parents did. The combination of rising house prices, stagnating wages and higher debt (including student debt) means that we are lagging behind the baby boomers when it comes to building our nest egg.
Highly influenced by the financial crisis, we are far more cautious when it comes to money and investing than our parents were. According to research conducted by Blackrock, 42 percent of millennials are too worried about losing their money to invest it. Combine this with the fact that we are the first generation who don’t define success solely by wealth and it’s probably not surprising that 96 percent of us don’t have an investment portfolio to speak of.
Unfortunately, all of these factors are contributing to the myth that millennials as a generation aren’t interested in investing. As a result, many traditional financial institutions have overlooked us and failed to develop offerings that align to our needs. A trend that has resulted 67 percent of millennials feeling that traditional financial services firms don’t care about them (Blackrock).
But contrary to popular opinion, research by banking app Revolut recently revealed that as many as seven out of 10 millennials are saving regularly. However, when it comes to making their money work harder, nearly three-quarters of them say that investing is too complicated (Dabbl). As a result, the last couple of years have seen a huge influx in the number of brands that are trying alternative approaches to tackle the fear that comes with putting your money at risk.
With two thirds of millennials saying that they have never been educated about financial planning and the best way to save or invest their money (Moneybox), education has become a huge barrier for our generation when it comes to investing. Off the back of this we are seeing brands like Finimize trying to fill gaps in knowledge with resources and tools that are helping a whole generation learn more about finance and prepare themselves for the future.
Their daily newsletter which summarises the latest financial news in three minutes, is sent to over 175,000 people daily and they run events which aim to educate people about a variety of topics from buying your first home to starting a side-hustle. Platforms themselves are also helping the cause with initiatives like Moneybox Academy which is a series of learning sessions to help teach people the how to plan for their financial future.
But education is only one of many ways that brands are helping millennials on the road to investing. With a staggering 62% believing that investing is only for the rich (Dabbl), access is a still an issue. Research by ABA found that 71% of millennials would “rather go to the dentist” than take financial advice from a bank, presenting a perfect opportunity for a new generation of robo advisors who do it all for you.
Using automated, algorithm driven financial planning to automatically invest in the stock market on your behalf, apps like Nutmeg and Wealthify allow investing from just £1, proving that investing is definitely no longer just for the rich.
Moneybox has taken access one step further with its ‘micro-investing’ approach. Unlike it’s robo advisor competitors, it removes all of the friction when it comes to investing, automatically rounding-up every purchase and investing the spare change into a stocks and shares ISA on your behalf. Much of the app’s success can be attributed to the fact that it fits seamlessly into its users lives, acting as an entry point for many first time investors.
Despite all of this, there are many millennials who are simply too scared of the stock market to risk their money on it. The reality is, stocks and shares are volatile and unpredictable and if you lack knowledge, it can be a difficult place to start. Combine that with the fact that it’s advisable to keep your money in for a minimum of 5 years and it’s no wonder that the millennials who are getting married, trying to buy houses and having kids are put off by stocks and shares investing all together.
As a result, we’re seeing the rise of alternative asset classes, giving millennials the chance to put their money into something that feels a little closer to home. Whether you’re interested in socially responsible investments, helping small businesses or investing in property, it’s now easier than ever for millennials to align their money with their interests.
Up until recently, investing in property had been inaccessible to most people as it required huge amounts of money and time to get started. With more millennials than ever struggling to get on the property ladder, the idea of investing in a property outside of a home might seem like a pipe dream. Investment marketplace, Propio, is on a mission to make it easier than ever before for a whole generation to reap the benefits of this asset class and all they need is £100 to get started.
Users can then access stable property investments which are secured against bricks and mortar with the chance to earn up to 7% per year. What’s more, it can all be done through an ISA so investors can benefit from tax-free returns on investments up to £20,000. With more than twice as many millennials prepared to invest in alternatives compared to those over 70 (Legg Mason), it’s not surprising that the brand is rising in popularity amongst this cohort.
Despite all the bad press that millennials get when it comes to managing their money, we do know more than we get credit for. It seems that the biggest barrier to investing is simply a lack of products that fit seamlessly into our busy, digitally led lives. However, as we are seeing more brands respond to our needs, the tide appears to turning for millennial investing. Hopefully, in time, we will see the bigger institutions rise to the challenge too.