How Millennials Will Change the Face of Finance
Millennials are not only the largest generation in U.S. history, they will also receive the greatest transfer of inherited wealth ever. As a generation, they have surpassed Baby Boomers as the nation's largest living generation, according to population estimates by the U.S. Census Bureau.
The most digitally connected generation are 18-35 year olds, with those being the first group born into the digital age. Not only that, but lower employment levels and smaller incomes have left younger Millennials with less money than previous generations. Student loans and other debt are taking up a growing chunk of postgraduate Millennials' income, so with less to spend, they're putting off commitments like marriage and home ownership.
Because of this, Millennials are poised to transform nearly every facet of the U.S. and global economy, and the finance industry is about to experience tremendous change as it works to address the needs and preferences of this different customer.
Depending on their age, Millennials have witnessed up to three major crashes in the stock market — 1987, 2001, and 2008 — and don’t necessarily trust public markets with their investment dollars.
That said, in the era of the “shared economy,” Millennials will most likely fine-tune their spending to become the most capital-efficient generation of all time.
As one example, let’s look at car ownership:
With the expansion of public transit and with young adults being concerned about the environment, they are accustomed to Uber and Lyft and don’t see the point in paying for a car that sits idle most of the time, much less the universe of costs such as interest payments, car insurance, maintenance, parking costs, etc. that come with it.
As Millennials age their wealth will grow, and they will naturally become investors as well. And beyond the sheer amount of wealth they will be controlling, they will be markedly different in their investing activities than the generations before them.
For one thing, they appear to know something the rest of us don’t. While Baby Boomers and Gen X’ers were selling during the two most recent stock market dives — Brexit and the oil price crash in February — Millennials were buying at a ratio of more than two-to-one.
Think about it. To them, crowdfunding and lending online aren’t new alternative fads or models, they’re the norm, as they were born as digital natives. To them, analogue models are old-fashioned and outdated.
For the world of investing, the stage is set for a coming together of technology and the habits of America’s largest generation to reshape investing norms.
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