Millennial Money Dreams: The New Financial Priorities of Millennials

Factors that altered the financial aspirations of the millennial

The millennial generation is known to face a significant amount of uncertainties and volatility regarding the overall investment arena. An uncertain economic future has been an active part of this age group leading them to make choices regarding financial plans, investments, and other opportunities with care and consideration. Creating a stable financial habit is a journey most millennials have undergone as they realize the importance of having enough savings, aiding their money growth with investments, better interest rates, etc. Many studies and research have shown that the attitude that millennials have toward investing is different from their previous generations. Read about the global trends of millennial investing here. The seismic shift in exploring alternate investment opportunities began with this population.

The millennial mindset – Generalizing the millennial mindset across continents is a far-fetched idea. However, multiple common elements bind this group together regarding talks on millennial investing. A big factor that catalyzed a change in the millennial mindset leading to an alteration in their financial plans, was the great recession. A study revealed that more than 15% of this population was left out of work. The millennials who were immune to the effects of the recession were then prey to the worldwide COVID-19 pandemic. 

A study in October 2021 showed the pivotal point in the shift in the mindset, as 33% of millennials reported a drop in their confidence level regarding retirement at a certain age. This is one of the main reasons why millennials are moving towards a global mindset. Being cautious and responsible, they are looking for investment options that provide not only tangible and lucrative returns but also ones that value their morals. The reliance on personal financial advisors is also on the rise. 

Here are some of the primary factors that have altered the financial aspirations of this generation:

• Social Media – There is no denying that social media has played a great role in developing the overall mindset of millennials. It is one of the most active parts of the millennial trends, and it has influenced several facets. In certain areas, millennials might feel the pressure to conform to societal standards of investing simply because their peers are doing so. Social media can add to that pressure, healthily at times, as it can motivate young and enthusiastic millennials to explore newer investment opportunities. 

• Family and upbringing – Family values are a huge part of what influences the Millenials (much like any other generation) to adopt certain habits – including financial planning and aspirations. Being raised in a household wherein the concepts of saving, investing, financial plans, management, etc., are emphasized will more likely lead to the inculcation of similar habits in the millennial generation. 
• Educational Background – A recent research conducted in May 2022 aimed to explore the relationship between how financial literacy affects financial behaviours among the millennial generation. The findings were that the more the millennials were educated and aware of the different aspects of economy, finance, and investment, the more positive their attitude toward financial aspirations and better decision-making. Developed countries with better infrastructure and access to investment avenues have benefited greatly from this trend. 

• Economic factors and events – At times, the events across the world, such as the pandemic or the Russia-Ukraine war, can be factors that influence financial decisions. Economic downturns or market fluctuations can be motivating factors that can lead to extra caution exercised by millennials that can boost their investment prospects. For example, in one study, 56% of participants experienced paused costs during the pandemic. Out of which, 45% of the participants started planning for the long-term uncertainties and were able to create nest egg savings 
• Cost of Living and overall expenses – The millennial culture has a lot to do with independence and self-reliance. Therefore, buying houses, cars, and other big/small elements is a part of their financial planning. Most often than not, salaries cannot measure up to the overall cost of living, let alone making these big purchases. The advantages of smart and timely investments could also extend to having a lifestyle that meets most millennials’ aspirations. 

• Interest Rates and Inflation – It is observed that the financial aspirations of the millennial generation are largely dependent on the current interest rates and inflation. A study conducted showed that interest rates impact savings along with the overall returns from investment. Inflation, on the other hand, plays a huge role in affecting the overall purchasing power. 
• Economic inequality – Economic inequality is a complex issue, and it can impact millennial spending and investing habits on multiple fronts. A study revealed that the disparity and inequality in financial factors in different countries have increased the level of caution among the millennial generation and taking other actions like moving to less expensive cities. The increased awareness about economic conditions can help shape the financial preferences of this generation leading to better goals and investing opportunities.
• Job Market – It is known that the job market can create a profound impact on creating financial goals. It directly influences income levels that can affect financial security. Better-paying jobs can abundantly boost the earning potential that can increase financial aspirations among millennials. Stability in the employment market can instill a sense of confidence, encouraging them to set more ambitious goals. Moreover, the better the job market, the higher the overall investment capacity would be. Millennials would also report a better risk tolerance with more security. Volatile jobs would reduce their risk tolerance and would lead them to seek more conservative approaches to investments

The factors that influence a millennial’s financial aspirations would not only depend on their personal preferences but also on the social and economic factors of the place they are living in. Many inter and intra-personal factors can affect this decision. The economic and financial landscape of each country constantly keeps evolving. Therefore, financial literacy will play an important role as an interpersonal factor to engage in better investment plans and financial goals