Can you believe that millennials have started turning forty? This generation, born from 1981 to 1996, now make up almost half of Australia’s workforce, and numerous research studies have looked at how they approach their finances.
Financial organisations Commonwealth Bank of Australia (CBA) and Afterpay Touch Group Limited both released reports in the last few years that identified many unique behaviours and highlighted key challenges millennials face when compared to previous generations.
The ever-increasing price of housing, education costs, stagnant wage growth, our ageing population, climate change related disasters and of course, the global pandemic are all elements that directly impact their financial wellbeing.
But they are savvy and have the ability to adapt to the current economic environment. We take a look at millennials and money.
Saying no to credit cards
One of the most interesting millennial traits is their tendency to say no to credit cards. Afterpay’s research found that only around 40% of this generation own a credit card, compared to two-thirds of older generations. And if they do have a credit card their debt is about half that of older people.
That doesn’t mean that they are averse to having debt, they just recognise that credit cards can lead to irresponsible spending and tend to opt for other payment solutions… including buy now, pay later services. And while this type of payment comes with its own set of potential problems, millennials see them as “a cheaper alternative to banking and open-ended credit.”
This data clearly dismisses the notion that millennials rely on credit to support an elaborate, opulent lifestyle. They actually appear to have greater control over their spending and are more financially aware than previous generations.
Saving and budget skills
Another fiscal feature of millennials is their ability to save and budget. The CBA research highlights that around 39% have a regular savings plan that they adhere to each time they get paid. For a generation sometimes described as financially flippant, this is a great statistic!
Plus, Afterpay found that around “80% of millennials have a budget compared to just 67% of older Australians. When millennials need money, only a quarter will turn to banks, with most preferring to use savings.”
With these notable saving and budget skills, CBA states that “58% of millennials say their five year plan includes buying a home or investment property,” so despite challenges within the housing market, a house is still something that this generation aspires to own.
The other area where millennials stand out on their own is the use of technology to manage their finances. They are technically savvy and know how to employ apps and other digital tools to make sure they keep on top of their dollars.
Afterpay research shows that 30% regularly use online tools to track and monitor their spending and around 7% use specific apps to maintain their budgets. CBA similarly notes that 1 in 4 millennials favour digital banking services as they provide them with financial transparency – helping them plan and stay ahead.
Another element of this is Afterpay’s finding that “72% of millennials use technology to compare prices before they shop compared to just 28% of older Australians.” This is a smart tactic that could really benefit everyone.
Financial planning advice
The evidence certainly indicates that millennials are mindful of their finances and are resilient, despite the tumultuous times they have grown up through. Juggling mortgages, often raising young children, together with their careers hitting new highs, it’s a time when it can be very advantageous to stop, take a breath and look at your financial plans.
If you are a member of this generation or if you have a millennial close in your life, professional financial advice can be beneficial.