Gen Y’s relationship with earning, saving, spending, owing and investing money may be even more disruptive than their approach to work and their attitudes in the workplace. Their life experiences will further change their financial circumstances and attitudes; their sheer numbers make those changes important. Money may make the world go round, but it is about to do so in very different ways, courtesy of Gen Y.
Financial insecurity combined with different attitudes to life and money will require a rethink in many markets, as Gen Y become an ever more dominate part of the workforce and therefore the economy as a whole.
What is changing?
In the USA, the Gen Y/ the Millennials are expected to make up some 36% of the workforce by 2014, and 75% of the workforce by 2025. Similar shifts will be happening in other economies. Because of their numbers, their role not just at work but in every market and financial activity will become ever more critical.
Gen Y’s attitudes and expectations in the workplace, their tendencies to change jobs and put greater emphasis on meaningful work and work: life balance than previous generations – to name a few traits, are seen as disruptive. They have significant financial implications, and not just for employers.
Gen Y is often seen as spoiled. However, they have more debt after studying; face fewer job prospects, lower salaries and higher house prices than previous generations, according to Canadian research. So far, they have also grown to adulthood during one of the worst global financial crises and witnessed financial scandals, stock market booms and busts like no other. These experiences will colour their financial attitudes and define their behaviour.
Millennials are staying at home longer, 36% on average in the USA – but 40% among Millennial men, but 32% among Millennial women. While this may mean that in the short term they have more disposable income, fewer households are also being created – around 450,000 compared with 1 million before the recession. The creation of fewer new households hits many major markets.
Why is this important?
Gen Y’s willingness to change jobs is expensive to employers, but it will have wider repercussions.
Gen Y faces potentially insecure financial futures, not just because of their own attitudes but wider circumstances such as the economic shift eastwards and the increasing role of robots taking lower skilled jobs.
In Canada, 20-24 years olds are an estimated to be 41% less well off than their counterparts in 1976. In the USA, the net worth of 29-37 year olds, admittedly not entirely the Gen Y group, is 21% lower than in 1983; the 56-64 generation is by contrast twice as high on average. Caution and different priorities are likely to prevail. They may also face even greater shortfalls in pension savings than current generations if earnings are lower.
Traditionally, mortgages are based on steady income. Radical changes in work and therefore earning patterns will require new approaches to housing finance. Given that the housing and mortgage markets have been under enormous pressure since the crash and Gen Y is also faced with increased debt levels, the tough times could continue for some time. Given the role of housing as a market driver in other sectors, those problems could spread.
Ownership of major items such as cars and houses is already falling as the usership economy grows. Financial uncertainty and the desire for greater control and flexibility across their lives is likely to increase that tendency; and their love of high end brands will continue to make access more important than ownership. New forms of part ownership, renting and usership will require a rethink across many consumer sectors.
But even where there is money, there are changes. There is a small but significant group of Gen Y – an estimated 12 million in the USA – who already earn in excess of $100,000. But here too, change is coming. Conventional approaches to money and investment may again not materialise. Rather they are ‘buying career freedom’, and approaching wealth management in different ways. And the boom and bust, scandals and crashes are all playing their part.
Gen Y are by no means a homogenous market or cohort, but they will make waves far wider than the workplace. Money may make the world go round, but it is about to do so in very different ways courtesy of Gen Y.
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