Debunking Top 3 Millennial Money Myths (+ My Advice)
Traffic-hungry editors love spreading Millennial money myths.
They portray Millennials as irresponsible snowflakes who can’t afford a house deposit because they spend too much money on avocado toast and flat whites.
Obviously, we all know this is rubbish.
These stereotypes hide the very real structural problems facing the average young person in the UK today – the unrealistic struggle to get onto the property ladder.
The fact that we can’t get onto property ladder doesn’t mean that we don’t want to buy our own place eventually, we do, it’s just that at this point we are priced out, so we are not rushing it.
We have different priorities.
We value self-discovery, careers and working towards financial independence, instead of settling down, getting married and having kids.
Because of this, my generation tends to think that although buying a house is the ultimate goal, it is not the short-term priority.
Millennials have different end-goals for saving. These can be:
1. An experience (often a holiday)
2. A physical object (a car, for example)
3. A house or a retirement
Each of these have different time frames and savings strategies.
We have short and long-term investment goals and we are balancing “treats” and holidays with financially preparing for the future.
Myth 1: Millennials are reckless YOLO spenders
A change in lifestyle – people marrying and having children later – means we are having different financial priorities.
Considering the obscene house prices in the last 10 years, I think spending on experiences and travelling are worth it, even if this spending delays getting on the property ladder.
In the survey, Millennials were asked how often they “treat” themselves (defined as a purchase made to bring joy) — 86% said they treat themselves at least once a month, setting them back $110 a month on average.
I honestly don’t think that spending $110 a month on something that brings you joy means spending money recklessly. And it doesn’t matter whether it’s a latte, an avocado toast, a concert or clothes.
It’s clear that the majority of us are sensible spenders who want to make the most of their life despite the lack of financial education and income.
Myth 2: Millennials have no savings
The fact that Millennials save less than Baby Boomers just shows that we have comparatively less disposable income than our parents did.
This doesn’t mean that proportionally to our income we save less than Baby Boomers.
Millennials are actually doing very well considering their spending power.
According to HMRC research, Millennials in the UK are super clued-up when it comes to savings, with 34% of under-35s contributing to personal pensions – the highest number since records began in 2001 (compare that to 24% of 35-44-year-olds and 26% of 45-54-year-olds).
In the US, more than half of Millennials are saving more than the national average and nearly 75% stick to their budget.
Myth 3: Millennials don’t want to buy a property
They say the reasons for “not wanting to buy a property” range from the unwillingness to put down roots to financial instability.
This is not entirely true.
While some Millennials may never afford to own a home, the majority (64%) of UK Millennials are working towards it.
2/3 of the UK Millennials said their long-term goals are to buy a property, get married and start a family (research by F&C Investment Trust and BMO Global Asset Management).
My money advice for other Millennials
I would recommend saving 20-50% of your income.
In the last 2 years, I’ve been saving 50% of my monthly income. This has been possible because of multiplying my streams of income (employment, blogging, freelance writing and consulting), and paying myself first.
By “paying myself first” I mean that on a payday I immediately transfer 50% of my income straight into my savings account, as opposed to saving what is left over from spending. This strategy limits my monthly spending money and forcing me to be mindful.
I would also split my cash into different accounts:
1. Emergency account
2. Savings account
3. Investing portfolio (if you want)
Here is the overview of them all:
1) Emergency account with Instant Cash ISA
Emergency account must be easy access and provide a sum of money should any unexpected events occur.
An Instant Cash ISA (Individual Savings Account) works in much the same way as an ordinary savings account, except you do not pay tax on the interest you earn.
Just make sure that this account has instant access, meaning you withdraw and deposit funds as often as you want.
I would say that 6-9 months’ worth of expenses are held within this emergency account at all times.
2) Save for a property with Lifetime ISA
Once you’ve built your emergency account and you want to save for a property, retirement or anything else, I would use the Lifetime ISA.
The Lifetime ISA became available for 18-39 years old in the UK in 2017 to encourage saving towards buying your first home, or retirement.
It is a tax-free wrapper that lets you put up to £4,000 in it every year.
3) Invest in stocks and shares
Investing in stock and shares is a loaded topic: some people love it, and others don’t.
It all depends on your personal circumstances and the amount of risk you’re willing to take.
If you do not need access to your capital for a long period, ISAs are a fantastic way to invest in the stock market.
By investing in the ISA, not only is your interest tax-free but also capital gains, meaning that your portfolio has more potential to grow when compared to Instant Cash and Lifetime ISAs.
But as a rule of thumb, you should invest for at least five years. This allows enough time to ride out any bumps in the market that might see you make a loss on your money.
Over the long run, historically stocks and shares have outperformed money in savings accounts, but that’s no guarantee they’ll do so in the future.
My bottom line is – investing is not just for “important people”. You can do it, too! Everyone with any amount of cash can start investing now.
But over to you now – how confident do you feel about managing your money?