Financial Planning: Millennials vs. Older Generations

Financial planning and the way we manage our day-to-day living has seen a major shift in the last decade. And it has all come down to the differences in the way the older generation thinks about savings and spending, and the way the newer generation feels about it. ‘Millennials’, the term now widely used for Generation Y, are people born between 1980 to 1994 according to some definitions.It is now no secret that millennials have a totally different outlook towards finances and how to live life, which is a far cry from how the older Generation X perceived it. Millennials often live life to the fullest. They feel renting a house is better than buying it. They are more tech savvy and want to have all the latest gadgets. They usually spend quite a bit more and have lesser savings. They love to travel the world and experience new cultures. Millennials are more interested in new startups. They are a career-first group of people.Let us find out some more differences between the financial outlook of millennials as opposed to the older generation.

Most millennials do not think much about investing early for retirement. They feel that investing for a goal that is 20-30 years into the future is best done after the age of 30. They're more interested in short-term goals until then. Investing in shares and mutual funds is attractive for them since they have a higher risk appetite and are looking to earn higher returns on their investments.The older generation, on the other hand, are looking to start planning and saving for retirement as early as possible. They invest in old-school instruments like fixed deposits, PPFs and NPS. According to them the best place to invest is in real estate and gold. They're hesitant to invest in the stock market or mutual funds since they feel it has considerable risk.

Millennials can take a leaf out of the older generations book by thinking about retirement planning as soon as they start earning. This can help them reduce undue burden later and create a nice cushion of funds when they retire later.

Something that the older Generation X usually do not approve of about the millennials are their extravagant spending habits. Millennials love to live in the moment and hence they do not think twice before spending on events, fashion, entertainment, vacations, food, gadgets etc. Millennials usually spend more and save less, which has given rise to an economy that is more consumption-driven rather than being savings-driven.Most of their salaries and their savings are sometimes as less as just 10% of their paychecks. They usually live paycheck to paycheck.Gen X is more focused on saving as much as they can. They understand the difference between and a need and a want. They sacrifice small pleasures for better long term goals.

Millennials usually marry late and perhaps this provides them with the leeway to spend more as they have fewer responsibilities. So until they have co-dependents like a partner or children, there is no problem in living life to the fullest. But of course, too extravagant a life can sometimes get out of hand and one must always rein in their expenses according to one’s earnings.

There is an ocean of difference between how millennials view finances and how the older generation does. But it is not true that one is better than the other. Both have some questionable habits and it is important to take the best of both worlds. From the older generation, millennials can learn about being disciplined and thinking about long term goals. At the same time, Gen X must learn from the millennials that you can only live once and it is important to have experiences in life and take calculated risks when investing.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.