Contrary to the stereotype, millennials are exhibiting some good money habits.
Most millennials entered the workforce during and after the global recession of the late 2000s and early 2010s, which means they had to navigate a tougher global economic environment than previous generations – one of high inflation and unemployment, social and political unrest, and low economic growth.
Yet, despite all the barriers, and contrary to stereotypes, millennials have helped jumpstart the world economy and are continuously contributing to its growth. Old Mutual’s research shows that 69% of employed South African millennials have a savings account.
The Lost Generation study by the Federal Reserve Bank of St Louis says that most millennials born in the 1980s will probably never recover from the global recession. It shows a related and significant wealth gap between them and their predecessors. While South Africa was not hit as hard by the global recession as other advanced economies, the local socioeconomic situation has not supported wealth creation for millennials who have entered the job market since then.
Yet, South African millennials are making a concerted effort to be better savers, or are at least mindful that they need to do so earlier on than other generations.
As a millennial myself, here are some of my valuable money lessons:
1. Excess can wait – cut extra expenses to take care of important costs of living
Millennials understand the importance of cutting down in order to save for what they want. The 2018 Old Mutual Investment and Savings Monitor (OMSIM) found that Recently Independent Financial Strapped (RIFS), a sub-segment of millennials, see savings as a priority. 50% of RIFS are saving for investment, while 36% are saving to purchase a property and 35% for a rainy day. We understand that a ‘good life’ does not have to mean lavish spending. Being able to take care of our immediate financial demands is more important.
2. More is more – get the most out of job opportunities
Millennials want a larger slice of the money pie. We know that saving requires disposable income to be put away, and according to the Bank of America’s 2018 Better Money Habits Millennial Report, we – more than previous generations – are asking for raises and moving jobs for better paying opportunities. Tools like Linkedin and Offerzen make job seeking far simpler than it was a generation ago.
3. Jobs are not the only source of income – find side-hustles to generate wealth
Unlike the linear notion of formal employment held by previous generations, millennials operate in a world that is more flexible in terms of income opportunities. Many of my peers are selling services and products in addition to our ‘day jobs’, a phenomenon that earned them the term ‘Slashers’ in a previous OMSIM.
The 2018 survey shows that one in three RIFS are Slashers. The ‘slash’ refers to the forward slashes used between job descriptors, as in, for example, programmer/yoga teacher. From Instagram modelling to Youtube vlogging, teaching language online or completing brand surveys for quick cash injections – millennials are creating wealth outside the formal job market. Don’t have a marketable skill? No problem. Websites like Udacity and Getsmarter will almost certainly have a course to help you pick up that new skill.
4. Mindfulness is the wealth-way – keep a firm eye on your money
We have taken our money out from underneath mattresses and are keen to know where our money is going and how our savings are growing. Over 140 000 South Africans, mostly millennials, use budgeting and saving app 22seven to help. It allows us to track our spending and saving habits and stay on top of our finances.”
5. Debt must be addressed – fight yours sooner rather than later
According to TransUnion, American millennials are more cautious when taking on shorter-term debt than previous generations and are instead using credit facilities for longer-term goals such as student loans. South African millennials are at risk because expensive credit, particularly store credit, is easy to come by.
The NBC News/GenForward study shows that the downside of expensive debt is that it cripples millennials’ ability to save for the things that matter (education, holidays, retirement) and paying it off may delay important life milestones like purchasing a home and having children.
6. Goals are saved for – make consistent deposits into your dreams
The 2018 Better Money Habits Millennial Report shows that millennials are more likely to set and meet specific financial goals: 57% out of the 63% of millennials who are saving have a specific financial goal. Through saving, we are travelling the world, seeing our favourite pop stars in concerts abroad and starting passion-based initiatives. In June, 22seven launched a new feature that allows South Africans to set goals, save for them in low-cost funds, track their progress and top-up when they have spare cash.