Millennials and money. Does a new generation need a new mindset?

It’s easy to make assumptions about Millennials, just as Baby Boomers made generalizations about Gen Xers like me two decades ago. But I always like to start with facts and, when it comes to Millennials and money, here are two that really matter:

FACT: Millennials have now eclipsed Baby Boomers as the nation’s largest living generation.(1) As of April 2016, 75.1 million Millennials populated the U.S.

FACT: This generation faces the most uncertain economic future of any generation since the Great Depression.

This uncertainty – combined with rapidly changing technology that seems to create both convenience and chaos – is defining how Millennials are looking at money and their own economic futures. And the sheer size of this demographic means their financial decisions today will have a substantial impact tomorrow. That’s why it’s essential we look at their financial attitudes – and realities – from their perspective.

Remember the financial crisis of 2008? They do too.

And having seen their parents lose a good part of their hard-earned nest egg, it’s no wonder so many have lost their faith (for now, anyway) in the financial system.

That leaves many young people putting off “adult” milestones like purchasing a car, investing in a home, even getting married. The life goals that were so important to generations that preceded them don’t seem to matter so much. With all this uncertainty, who’s even thinking about retiring one day?

Record student debt is their new reality.

Millennials are on track to being the best educated generation we’ve seen, but there’s a downside to that.(2)

In 1989, 17% of 20- and 30-somethings faced student debt. Today, that number is 42%.(3) That’s four out of ten people mired in debt before they’ve even started out in life. It’s hard to consider saving for the future when you’re watching the interest on your already substantial student loan grow. Faced with paying down debt, living for the moment or bankrolling the future, something’s got to give. (Hint: It’s probably the future.)

Welcome to the first cashless generation.

Millennials look at money in a way no generation ever has, literally since the invention of money. Cash is no longer a tangible thing – it’s ones and zeroes.

The evolution – better, revolution – of digital payment technology has created a seismic and unimaginable (to my generation, anyway) change to the way money is viewed.

And it’s a good-news/bad-news story.

The good news is that “cash” is more convenient than ever before. Forgot your wallet? No worries. You can buy that coffee with your phone. Who needs pocket cash when you can tap-tap-tap? 

The bad news is that “cash” is more convenient than ever before. Cashless interactions can mean that money flows faster than ever before. When every transaction is just a tap of your phone or card (without actually having less physical cash in your pocket at night than you had in the morning) tracking your cash flow demands a far more conscious effort.

So now we have a new set of facts to examine:

FACT 1: A generation raised in economic uncertainty has become skeptical about their own financial future. And they’re hesitant to act on it.

FACT 2: The most educated generation is also the most in debt because of it.

FACT 3: The disappearance of physical money has made it an intangible. Cash comes. Cash goes.

What do we do with this information? We recognize that Millennials – despite facing challenges that we never had to – aren’t really all that different from the generations that preceded them. And we do what generations before us have always done. We go back to the basics.

Here’s the advice I would give my 20-something self today:

The $20 kick-start.

When debt can feel overwhelming and the future is far, far away, putting that $20 currently in your pocket into a few beers can seem like a pretty good investment.

Setting aside something – anything – to bring down debt and build up savings is simply Smart Finance 101. That $20 a week can add up to $1,000 saved in a year, and that’s before interest. 

So, when’s the best time to start? Now. You don’t need a specific objective; life’s always changing and so are life goals. As long as money’s going into the bank, you’re good. It’s always easier to redirect your goals than to start from scratch. 

Use your age to your advantage.

You’ve got time – and compound interest – on your side. The sooner you start saving, the more you’ll have when it counts. So, let’s look at that $20 a week.

From 1928 to 2016, the average return of the S&P 500 was 10%. But, since we can’t predict the future (and for argument’s sake), let’s take that down to 6%. Invest that $20 a week and you’ve got $6,000-plus in five years. Now let’s make that $100 a week. Suddenly, you’re looking at $30,000-plus five years from now. Okay, you’re not going to retire on that, but at least it’s a start. Trust me, as your earning power goes up and gives you more to set aside, that amount will grow and grow five, ten, twenty years from now. That’s just math.

Automate your investments. It’s literally a no-brainer.

If you don’t want to think about investing right now, you don’t have to. Just decide how much you can afford to save, and set up automated investments to go into your 401K, brokerage, or banking account every payday. After a while you won’t even miss the money. Meanwhile, it’ll be adding up and up and up.

What do you say to free money? You say yes.

Many employers will match your 401(k) contributions. Make it a priority to invest the amount required to earn that match, at a minimum. And more if you can. It’s literally doubling your money.

While times and technology have changed, the principles of building wealth remain the same. Millennials may not look at investing in the long term as a top priority, but they have concerns and dreams just as every generation has. And the financial truths of twenty, thirty, fifty years ago are still relevant in today’s realities.

(1)  https://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-baby-boomers/

(2) https://www.pewresearch.org/fact-tank/2015/03/19/how-millennials-compare-with-their-grandparents/ft_millennials-education_031715/

(3)  https://www.cheatsheet.com/politics/this-is-what-the-recession-did-to-millennials.html/