Saving, spending and investing
From a Millennial perspective

“There are two kinds of spurs, my friend. Those that come in by the door; those that come in by the window.” – Tuco the Ugly

"The good, the bad and the ugly"

Saving, spending and investing. The inevitable things we have to consider when making financial decisions. As we look into the past, we can see how people react to these three different aspects of financial decisions. To summarize, here is the holy trinity of money usage simplified:

  • Save money – It will probably be more useful in the future.
  • Spend money – Temptation wins patience
  • Invest money – Maybe I can double my savings in 20 years aka I’d rather have the most awesome retirement

Times have changed and likewise the financial decision-making of the new generation bankers, aka. Millennials. In order to understand how customer behaviour is changing, we have to look into the minds of Millennial bankers and see how they see “the good, the bad and the ugly”.

Money looks better in the bank than on your feet

Millennials are very interested in saving. Still, they are 1 trillion US dollars in debt according to the Federal Reserve Bank of New York (2019). This debt consists mostly of student loans and mortgages. Even though this might at first glance seem like a catastrophic situation, Millennials are actually more risk-averse than previous generations. Millennials are more cautious about the future, therefore living with your parents longer, marrying at a later age or delaying starting a family are quite usual decisions among millennials.

You have to spend money to make money

Because of less money and more debt, Millennials are putting aside things that were first priority to the Gen X or Baby Boomers. So where do Millennials spend all that debt or the little money they have? When talking about debt, Millennials are spending that money on education. Pew Research Center (2019) states that about 40% of Millennials have a bachelor’s degree or higher education. Compared to the Gen X, that’s 10% more. Social media creates pressure for Millennials. Because of connectivity and thousands of pictures posted daily about high-life and newest trends, Millennials are more compelled to match these standards. They are highly influenced by their friends in their spending decisions (clothing etc.). What is also worth mentioning, is that Millennials are more familiar with “shared economy” and therefore are more reluctant to buy new products. Before, you were warned not to step into a strangers car. Now, you call an Uber and you defy your parents’ warnings.

In investing, what is comfortable is rarely profitable

Technology has always played a big role in the everyday lives of Millennials. This is why they are investing in technology more than any other generation. Information about best investment options are investigated through online research. Responsibility and global problems such as environmental change are important to Millennials, hence they want to research in detail the things they want to invest in. Interestingly, according to Visualcapitalist’s research, 70% of Millennials would rather talk to a human rather than robots about investments. This research also highlighted that when deciding which professional financial service they would use, 40% thought that the cost of service is one of the deciding factors.

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