Millennials have been receiving a lot of attention. Their shopping habits are changing the way retailers operate, forcing a lot of them to scale back on traditional store locations and instead embrace online storefronts. Their desire to own a condo or home is now providing a boost to the housing market.
You may have asked yourself, are millennials that much different from baby boomers and older generations? How are their money saving and spending habits?
There is a lot more to know about this generation other than tagging them for their lack of financial responsibility. They’re not as different as you might believe. Here’s a look at how millennials handle their money, debt, and savings. You might be surprised at the similarities they have with the other generations.
The Millennials (Gen Y)
Millennials, also known as Gen Y, Gen Me, Gen We, and Echo Boomers are the demographic cohort that directly follows Generation X. They are composed of individuals born between 1981 to 1996.
This generation is also known as having excessive usage and familiarity with the internet, mobile devices, and social media, and are often referred to as digital natives. Many were exposed to significant economic disruption such as the Great Recession and the recent COVID-19 pandemic. These occurrences have somehow shaped the way they think about money.
Characteristics of Millennials
Before looking at the spending habits of millennials, it’s important to look at the habits they have as well as their priorities.
We all know that there is a great deal of variation from one generation to another. Millennials, having been raised under the mantra "follow your dreams" and being told that they were special, tend to be confident. While largely a positive trait, this generation’s confidence can sometimes become a sense of entitlement and narcissism.
Millennials are well-educated
According to Pew Research Center, millennials arebetter educated than prior generations. About 39% of millennials from the ages of 25 to 37 have a bachelor's degree or higher as compared to about 25% of baby boomers who had at least a bachelor's degree when they were 25 to 37 and 29% of Gen Xers who had earned bachelor's degrees or higher at the same age.
Millennials are more likely to live in their parents' homes
There might be a number of factors that influence this decision - it may be the high housing costs or their tendency to marry later in life, but most millennials are living in their parents' homes longer.
Pew Research Center found that in 2018, 15% of millennials from the ages of 25 to 37 were still living in their parents' homes. When baby boomers were 25 to 37, only 8% of them lived in their parents' homes. Meanwhile, only 9% of Gen Xers lived in their parents' homes when they were 25 to 37.
Millennials, technology, and their media consumption
About 95% of millennials still watch TV but Netflix edges out traditional cable in this sense. This generation is extremely comfortable with mobile devices. In fact, about 32% of millennials use computers for purchases. They also have multiple social media accounts and are very active on these platforms.
Millennials spend more on experiences
Millennials are known for their #YOLO (You Only Live Once) movement. They really spend on experiences that allow them to bond with family and friends. They do not mind shelling out money on trips, taking art classes, or trying out food, and they do these not just for taking selfies to post on social media. For them, it is about experiencing life and pursuing their passions.
According to a study, 72% of millennials prefer to spend more money on experiences than on material things. About 55% of this generation are willing to spend more on events like concerts, music festivals, and fun runs.
Millennials and their banking habits
Millennials have less brand loyalty than previous generations. They prefer to buy products and features first and have little patience for poor customer service. Because of this, they trust those brands with superior product history. Since they are tech-savvy and use digital tools to help them manage their debt.
Millennial’s financial horizon
This generation is said to be powering the workforce but with debts. This causes them to delay their major purchases like their own home and wedding. Because of this financial stability, millennials choose access over ownership, which can be seen through their preference for on-demand services. They also want partners who will guide them through their big purchases.
Millennials and their spending habits
According to studies on millennials’ spending habits, 86% of millennials are setting aside at least some amount of money each month. For those of them who are saving money, their primary purpose for doing so is to build an emergency fund, followed by saving for a down payment and repaying debts respectively. Those millennials who are saving for a down payment on a property think that they would be able to be in the right financial situation to buy by the age of 31-33.
While it is recommended that people have enough savings or emergency fund to cover at least 6 months of living expenses to account for possible occurrences like job loss or unexpected sickness, about 1 out of 4 millennials could not cover 1 month of living expenses with their savings if such conditions arose. Only 15% of their savings accounts meet this recommendation. Most millennials are likely to turn to other sources of money given the lack of savings they have. They often turn to their parents or guardians for assistance when the need arises.
Financial experts say that it is best to save for retirement as early as possible and while millennials are years and years away from retirement, it has not been given much importance by the said generation. In fact, about 1 in 4 millennials are currently not doing anything to prepare for retirement. They also allot some of their money for coffee outside of home, ridesharing services, travel, and clothing.
In terms of their financial future, about 2 in 5 millennials do not believe that they will have a better quality of life than their parents. However, if they will think about it, there is still plenty of time for them to turn that sentiment around by setting up healthy saving habits and strategies to ensure their future is as bright as it should be.
While their spending habits do not align with ways they are often portrayed, there are a lot of opportunities for smarter saving strategies to help them prepare for their future.
Financial Tips for Millennials
Here are some simple tips to help millennials handle their personal finances independently and effectively.
Set a budget
Setting a budget does not mean you have to track every money you spend. Rather, it means knowing how much of each paycheck should go towards your bills, savings,investments, and then wants or needs.
You should think of your basic needs as your first priority - food, shelter, internet, and mobile. Next priority should be the allotment for savings and investments and then the remaining money can be viewed as extra funds to treat yourself or for your “wants”.
Setting a budget is very important to be able to control your expenses, avoid lifestyle inflation, and debt.
Cut down your expenses
Boost your savings by finding ways to cut down your expenses. Assess yourself, check the things that you are willing to give up, those guilty pleasures that you are willing to sacrifice. What are your wants versus your needs?
You have to make adjustments in the other areas of your expenses if you really want to see results.
Pay yourself first
Paying yourself first means preparing for your future. Start saving money from the very first paycheck, in addition to your contribution towards retirement. You also have to start building your emergency fund.
Remember to have at least three to six months of living expenses in savings and easily accessible money in case the unexpected happens such as a job loss, accident, or medical emergency.
Build that habit of saving by starting small then increase the amount of money you save as your income increases.
Settle your credit card debt
Millennials are fond of using credit cards as a tool for building credit history or for earning perks and rewards. But you also have to remember that it is an additional responsibility.
Make sure not to get into the habit of paying the minimum amount due on your credit cards because it will only entail interest. Also, it does not help improve credit scores.
Remember to pay your credit bill on time and in full every month to avoid debt, interest, and other charges.
Establish saving goals
Another way to save money on a tight budget is to set up your saving goals.
There are banks now that help you create your financial goals and as part of the goal account set up, you will be asked to set the frequency of the top up, amount, and the funding account. The top up is usually automatically scheduled and debited from the funding account based on your preferred frequency.
Set up automatic payments
Avoid debts, late payment fees, and interests. Set up automatic payments between your accounts and pay for your monthly bills.
This way, you will not forget to settle your bill and it will also help you ensure that the money is out of your account on time, thereby avoiding getting hit with late fees.
Have a side hustle
Nowadays, having a side hustle is becoming more and more popular. This is when you utilize your free time to generate more income. A lot of people who are working on a 9 to 5 office job are exploring other sources of income that they can do or manage when they get home such as working on a blog or growing affiliate marketing income.
Having a side hustle will enable you to generate income and boost your savings and investments potential.
Invest and grow your money
Getting started on investment is crucial for any young and new investor. Before you start investing, consider your financial risk level. Consider goals-based investing to be able to invest for a specific timeline.
You also have to decide where your investment funds will come from. Ask yourself, where will you pull your extra money for investing? Will it come from your savings account?
Set an investing budget, educate yourself on investment, and determine your short-term and long-term goals.
Millennials are different from the other generations in how they view, spend, and save money. They have different habits on how to handle their finances but it is also a bit surprising to know that they are just as hard-working, thrifty, and goal-oriented as the previous generations, in contrast to how they are usually being portrayed.
The most important thing to remember is to just get started. Millennials have a lot of time on their side and a lot of opportunities to explore. If you are a millennial reading this, do not waste your time. Build on your wealth and handle your finances carefully. Reach out for help or ask for advice if you need to. Handling life’s finances can be daunting but if you have the willingness to do it right and in the soonest possible time, you will surely succeed.
If you are planning to invest in a real estate property like a condominium, you may want to look at the various ready for occupancy and pre selling condominium projects of top property developer, Vista Residences.
Vista Residences is the condominium arm of the country’s largest homebuilder, Vista Land & Lifescapes, Inc., which offers ready for occupancy and pre-selling condominium projects in Manila and Quezon City that are strategically located within inner-city areas, in close proximity to premium universities and developed business districts.
Vista Residences is part of Vista Land’s roster of vertical housing brands that cater to millennials and young professionals. The other vertical and housing brands include Camella Manors, COHO, Crown Asia, and Lumina.
For more information on Vista Residences, email [email protected], follow @VistaResidencesOfficial on Facebook, Twitter, Instagram, and YouTube, or call the Marketing Office at 0999 886 4262 / 0917 582 5167.
