If you’re an earning millennial, this one’s for you…

By Danielle van Wyk

Innovative, entitled and overly confident are but some of the stereotypes that people have come to associate with millennials. Well, that and their obsession with artisanal coffee, social media presence and boutique restaurants. But there is so much more to this generation. One such thing is their unique approach to investing.

According to a recent Old Mutual investment study millennials are increasingly opting to manage their own finances.

It showed that 24% of millennials are invested in a unit trust – versus only 2% among older generations – with 57% of millennials saying they invested in a unit trust to increase their net worth (1st) and 47% aiming to reach financial freedom (2nd).

However, the survey also revealed that 35% of millennials – the first generation to reap the fruits of democracy – were saving money to pay back debt. This number was 13% for older South Africans.

The study shed light on the fact that millennials are for the most part uneducated when it comes to the importance and benefits of investing properly.

Why should millennials invest?

Stephen Silcock, investment manager at Investec Wealth & Investment, explained:

•Most people do not plan sufficiently for retirement. Millennials are at the stage in their life where it is not too late to start saving and investing.

•If millennials do not save or invest, they may become a burden on the state or on future generations.

•At the same time, millennials will on average live longer than their parents, thanks to the technological advancements in the healthcare sector. Saving and investment plans must allow for this longevity.

•The propensity to spend among millennials seems to be higher than other generations, so there is a greater need to encourage saving and investment.

•The power of compounding is often called the eighth wonder of the world. Everyone, including millennials, should understand that “sweating your assets” is vital for a comfortable retirement.

Where to invest millennial money

Silcock suggested local and global equities with longer-term potential to cater for the greater longevity of the millennial. According to him retirement-savings type vehicles remain an efficient way to invest over the longer term.

Millennials have invested more in “human capital” than any other generation. According to US data, more have earned a postgraduate degree than any other generation at the same stage. This means financial services providers must cater for a growing demographic that is both savvy (not just about tech) and demanding, said Silcock.

Another finding in the Old Mutual survey was that millennials often feel as though they don’t earn enough to invest or be taken seriously by financial advisors.

But according to Ronald King, head of public policy and regulatory affairs at PSG, the trick is to get the basics right first.

These vital basics include:

  1. Disability cover
  2. Retirement annuity (RA)
  3. Life cover

“The traits of millennials such as their value of family and community, their love to travel and their desire to maintain a healthy balance between work and pleasure mean that they need to understand, value and practice wise investing to reach these goals,” stated King.

Times are changing, but there are certain financial principles that do not. And making smart financial decisions for your future will always be the cool thing to do.

Tip: To get your investment portfolio started today, apply for a unit trust here

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