Yesterday we ran an extract from Own It!, a new book by IONA BAIN about money and investing, specifically aimed at those in their 20s and 30s. It was pretty sobering. Millennials, Iona explained, are at a considerable disadvantage compared to their parents’ generation because of several factors: for example, the global financial crisis, Quantitative Easing and the fact that inflation has been consistently higher than interest rates.
But we want to inspire you, not depress you. So, in the second and final extract from her book, Iona gives five reasons why her generation has far more financial clout than you might think — and explains how what she calls “smart investing” offers young people a genuine chance to “own” their future.
Okay, we’ve established that young people have faced a lot of pain in the last decade, and it continues today. But it’s not all doom and gloom. Modern life offers our generation an incredible degree of self-education, amenities and choice.
Our parents’ world was more limited than ours, especially for women. To think that when my mum was my age (30), a pub could legally refuse to serve her if she was the one buying a round (this only changed in 1982)!
We can learn, earn, up-skill, work flexibly, and optimise our finances like never before. In other words, we have a genuine chance to really own our future.
There are five big reasons why we matter.
1.Millennials belong to the biggest generational cohort since the boomers. We make up more than a third of the modern workforce. We spend more than any generation on food, fuel phone bills and and other basics. That makes us a collective force to be reckoned with.
2. We are in the driving seat when interacting with brands – financial or otherwise. Where our parents had to be loyal to a limited choice of companies, we can be fickle. Technology is progressing at its most rapid rate in history, improving access to and quality of services all the time.
3. A universe of information is now at our fingertips. Alongside the mainstream sources are alternatives, including citizen journalism, consumer reviews and in-depth commentary of the likes never previously available.They are full of tripwires, sure. But young people who know what to consider (and what to discount) can chart a path through it all – and come out more empowered as a result.
4. We can be value conscious. This doesn’t mean chasing the lowest costs above all else. What I’m talking about is weighing up costs accurately so we shouldn’t pay more than is necessary. I won’t pretend we are in a utopia where all costs are easy to compare. But things are slowly getting better and young people can take advantage.
5. Some of us have actually got some cold, hard cash coming our way. Millennials are in line for a future £5.5 trillion windfall from baby boomers and five million people aged between 25 and 45 reckon their inheritance could be worth £50,000 or more, according to one estimate. In July 2020 the Institute of Fiscal Studies said a quarter of people born in the 1980s are set to inherit £300,000 or more.
The problem with inheritance
All that money our parents and grandparents have built up in property and investments … to put it bluntly, they can’t take it with them. It needs to go somewhere and it’s most likely going to come down to us. But before you start measuring the curtains at Nana’s country pad, hold your horses.
Yes, some of us (including me) have benefited from grandparents handing down a bit of cash. But the average age of parental inheritance for millennials today is estimated to be 61.
Just in time for our retirement, which will be a big help. But it would be unwise to depend on inheritance – particularly as 40% of millennials have never actually discussed it with their family.
How do you know that a nasty shock doesn’t lie in wait? That your family isn’t miscalculating how much the house is worth, that the tax regime won’t drastically change … that your parents haven’t signed over the cash to the local cats’ home to teach you a lesson? (Not that Tiddles and co don’t need the cash, but still.)
Besides, even if the money does come your way, how will you know what to do with it? This is particularly true for those teenagers who are starting to see their child trust fund (CTF) mature.
All babies born between September 2002 and 2 January 2011 were eligible for a CTF, which came with a £250 bung from the government. Family members and friends could all chip into CTFs, and the children can withdraw the money when they turn 18.
I hear of parents and grandparents who lie awake at night, worrying what will happen when their kids and grandkids reach 18 and get their hands on the money – worth five or six figures, in some cases.
If you haven’t got to grips with investing, you would be completely floored by having that much money in one go. For example, stuffing it all in the bank could result in your money losing value over time.
So what are you gonna do?
Just say no to YOLO
Of course, you could just decide to spend, spend, spend. And some young people are living it large regardless of how much they’ve got in the bank, by maxing out credit cards and overdrafts.
Some might say: “What’s wrong with that? Those Brexiteer baby boomers wrecked our future and coronavirus forced us to live like hermits. We should just enjoy life, consume to our heart’s content and let the future take care of itself.”
C’mon guys. My time as Young Money blogger has convinced me that we have to do better than that. I’m all for ‘carping those diems’ but spending every penny we have isn’t a good way to do it.
Whether it’s earned or given to us by others, money is precious. Once it’s gone, we’d better be sure it went on stuff that really brought us joy and fulfilment.
Make your cash count
It’s not about having more cash here and now: it’s what we do with it that counts. By learning how to invest for and in yourself over the next 30 years, you won’t have to rely on parents or grandparents handing over their wealth to you. And if that does happen, you’ll actually know how to make the most of it!
It’s the promise of big lump sums tomorrow that is driving companies to capture our loyalty today. And we can capitalise on this right away, even if the big bucks don’t land in our laps for a decade or three – if at all.
We’ve got to start owning it whatever happens. After all, there’s little point in keeping up with hustle culture,‘ rising and grinding’ and working your ass off to achieve your amazing ideas if you neglect the thing that could make the biggest difference to your long-term prosperity: smart investing.
If you missed yesterday’s extract, you can catch up here:
Own It! by IONA BAIN is published by Harriman House.
PREVIOUSLY ON TEBI
NOT INVESTING YET? WE CAN HELP
If you’re in your 20s and you haven’t started investing, it’s time you did do. And if you want some professional help, we can point you in the right direction. Just click here and send us your email address, and we’ll put you in touch with a suitable adviser. Please note: this service is only available to those in the UK.
© The Evidence-Based Investor MMXXI