Millennials and their take on generational wealth

The imminent wealth transfer to Millennials from the older generation has attracted considerable attention, with banks racing to fetch the potential benefits of the wealth shift. Facing the fear of missing out, financial institutions are adapting to the new dynamics. Post transfer, conventional methods like expensive money management and outdated advisor relationships are anticipated to no longer be effective. This transition will be a reflection of millennials desire for technologically driven and economical financial solutions. The changing landscape will possibly alter the financial sector and enable banks to reevaluate their strategies as per the millennial’s outlook on money  management and investment. 

The idea of wealth transfer for millennials is apprehensive as well as alluring. Millennials’ take on generation wealth is not as same as their previous generations. Their money matters are influenced tremendously by the humongous knowledge available online, unlike relying on individual advice, which was the approach previously. 

As per a report from Barclay, it was revealed that millennials’ investment is purpose-driven, which challenges the traditional ideas of wealth accumulation. The generation that faces a volatile market desire to provide their parents with stress-free retirement by allowing them to use their money for wealth creation rather than the inherited wealth. 

Here are five prominent thought processes of millennials regarding generation wealth that have been observed recently. 

1. The Dilemma of utilizing the generational wealth 

Facts about millennials reveal that they are highly skeptical about inheriting wealth. Many believe they can attain financial freedom and potential financial stability with inherited wealth. Still, to some, the thought of inheriting a significantly huge amount questions their ability to handle it and might reduce their drive to make money independently.  

Millennials tend to have a value system that motivates them to invest the generation’s wealth as per their financial literacy rather than accumulating it and passing it down to future generations without any purpose. Financial institutions view this way of utilization of generational wealth as an opportunity to attract people who benefit themselves and society with their inherited wealth. 

The changing attitude towards generational wealth by millennials depicts their shifting priorities of creating a legacy and investing in experiences and personal and social growth rather than channelizing money only towards building financial assets.  

2. Usage of generational wealth to pay off student debt loans 

According to an article published by Forbes, millennials face the maximum burden of student debt which results in a lower median net worth when compared to baby boomers and Gen X.

Although some millennials are appreciative of generational wealth, a huge chunk of them are stuck with student loan debt due to the absence of generational wealth. The ones that have generational wealth waiting for them – will pay off their student loans and the ones that don’t have generational wealth will continue to miss out on the opportunity of investing in stocks, real estate, and passive ETFs, early on in their lives. This takes away the opportunity of compounding from them. 

3. Changing preferences and shift in priorities 

Unlike previous generations that preferred accumulating material possessions, millennials value spending on experiences and helping personal and societal growth. Millennials, born in a rapidly evolving world, seek financial independence through entrepreneurship and investing by acquiring knowledge online. 

Millennials prefer valuing environmental sustainability and prioritizing social responsibilities. The financial institutions are providing them options to invest their generational wealth into options that align with their idea of impacting the environment and society positively. 

 The changing thought process of millennials points towards the idea that generational wealth is not only a matter of inheritance but can be seen as a significant factor in working hard and consciously investing in building assets as well as experiences. 

4. Inheriting generational wealth mindfully

In case generational wealth is inherited without facing the situation of losing a loved one, people tend to take mindful decisions about handling the significant wealth. However, if one inherits wealth by default with an unprepared mind, the unfortunate decisions can lead to the dilution of wealth. 

Millennials are open to seeking help from financial therapists and counsellors, who provide great opportunities and guide them towards the right investing options. They seem to be more prepared to give themselves time to heal when facing such situations. This helps them take responsible decisions while investing the inherited wealth. 

However, it is also noticed that generational wealth received due to the loss of a loved one can induce guilt in millennials. This guilt relates to their deep-rooted belief that money should be earned with hard work, which can cause them to make poor investing decisions about generational wealth.  

5. Challenging norms and breaking taboos 

Unlike the traditional generations, which were not open to talking about topics like generational wealth with families, millennials are breaking taboos and engaging in thoughtful conversations about generational wealth with their families. They give importance to financial literacy, which was neglected for years and became the cause of poor utilization of wealth.  

Indulging in transparent discussions on money matters with the family has equipped millennials and future generations with the rightful knowledge to take quality investment decisions when it comes to handling generational wealth. In support of this, many financial institutions have come up with educational programs to empower millennials to make informed financial decisions. 

The Bottomline

The concept of generational wealth is a trending topic for financial institutions vying  to engage millennials. This generation is constantly shaping the societal view about inherited prosperity. While many millennials welcome the opportunity to wisely invest the inherited money, a fraction of them prefer to build success from scratch, breaking the long held taboo about inheritance.

Millennials’ desire for an equitable society is reducing their reliance on hereditary wealth. As the generation startles the change, financial institutions must pivot strategies to captivate these minds with a penchant for  self-made wealth over handed down wealth. 

FAQs:

How do Millennials generally feel about receiving generational wealth?
Many Millennials see it as an opportunity for financial stability but often feel a responsibility to use it wisely.

Do Millennials rely on generational wealth for financial security?
While some see it as a safety net, most Millennials don’t rely on it due to economic uncertainties and changing job markets.

How does receiving generational wealth impact Millennials’ financial goals?
Receiving wealth can accelerate their goals, like buying homes or paying off debts, but many still prioritize earning their own way.

Are Millennials interested in preserving and growing generational wealth they receive?
Yes, many prioritize investing and managing inherited wealth responsibly to pass it on to future generations.