‘Generation Gap’ is a funny thing. Every generation believes that the next one is less responsible, less motivated, and less likely to succeed. Younger generations’ decisions about everything from music to marriage are questioned.
However, this concern is not without any reason as the youth often makes impulsive decisions that may land them in trouble later. However, when it comes to handling money, the millennial generation has pleasantly surprised the rest of society. Millennials are making smarter financial decisions than expected – smarter perhaps, than the ones their parents made.
Here are six smart moves made by millennials when managing their finances.
- They make a budgetand stick to it!
Young individuals joining the workforce have acquired the reputation of being big spenders. Online shopping, eating out, and ordering-in are the latest trends— and are often, frowned upon by the parents. However, these big expenses are not always impulsive and unchecked. Youngsters today, are conscious of their income and expenses, not to mention the student loans they have to repay. The urban youth is making a budget and sticking to it!
- Millennials have started investing early
A growing trend among young working-class individuals is the habit of saving and investing money from an early age. The millennials, also known as Gen Y, belong to a generation that has grown up in the age of rapid technological advancements coupled with financial instability. They were born between the years 1980 and 2000 and are between the ages of 18 and 34, who have witnessed the great financial crisis of 2008. This generation was exposed to financial instability at an impressionable age, leaving a lasting impact on their spending and consumption patterns. India is blessed to have over 200 million Gen Ys today, who happen to be in the most productive age group from an economic standpoint. These people have learned important lessons from the economic crisis and have begun to save early in their careers. An early start puts them far ahead in the game of finances than their parents were in their youth.
- They prioritize retirement planning
For millennials, retirement planning is not a goal on the back burner. Most of them do not set a target age of retirement. Rather, they set a target corpus to be accumulated before they plan toretire. This is a much more effective approach to retirement planning because it puts a spotlight on the type of investment they choose to achieve their goal. The older generation, also known as Gen X, values stability and security and has shown a definite preference for fixed income investments like fixed deposits (FDs), Public Provident Fund (PPF), and real estate. However, today’s generation has figured out the pitfalls of this strategy. Firstly, conventional fixed income securities yield low returns, which means a large portion of one’s income needs to be diverted to retirement planning. Secondly, the returns generated from these investments rarely beat inflation. This defeats the purpose of investing because the value of one’s money gets eroded instead of growing.
- Gen Y makes smarter investment choices
Gen Y has been making smart investment choicesby increasingly investing in mutual funds. Such investment offers flexibility along with a potential to earn high returns, which are two features every young individual greatly values. Mutual funds also have the benefit of a wide variety of products. Investors may choose different mutual fund investment schemes based on the asset class where the corpus will be invested, the size of the investment, their risk profile, and their investment horizon. Being early investors with clear financial objectives, most young investors are investing in mutual funds on a long-term basis.
- They are re-evaluating priorities
Things that used to be necessities for older generationsare not as important to millennials. Real estate, cars and, consumer durables, for example, are no longer as important to Gen Y. For the young generation, the focus has shifted from ownership to access. They would rather save and invest than put money into ownership of assets like real estate, cars, or gadgets. They prefer to rent rather than buying assets and getting weighed down by Equated Monthly Instalments (EMIs) for years.
- They do not hesitate to seek advice
Young investors are comfortable with technology. They rely on mobile apps for financial management, expense tracking, and investment planning. More importantly, unlike older generations, Gen Y does not shy away from seeking expert advice when it comes to savings and mutual fund investment. This is because they understand that sound financial advice goes a long way in growing one’s wealth.
Angel Wealth is committed to guiding India’s young investors in creating wealth and maximizing returns. Their award-winning proprietary ARQ investment engine has been designed to help individuals track expenses, plan investments, and achieve specific financial goals. ARQ processes over a billion data points to give customized mutual fund recommendations without any human intervention. When it comes to investment advice, this technology-driven investment advice tool, the core highlight of Angel Wealth’s mobile application is the best in the business! Download the Angel Wealth mobile app and experience investment recommendations on-the-go through the ARQ tool.