Rich Millennials and Gen Zers See Investments Differently Than Older Generations

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As it turns out, the wealthy are not all the same, according to a recent Bank of America study of wealthy Americans. In fact, your generation has a lot to do with how you view investing and related topics. This makes sense given that the economic landscape is vastly different for the Silent Generation and baby boomers, who are largely retired and past their income-earning years, than it is for Gen Zers and millennials, who are still in the earlier days of wealth building.

Younger investors have different attitudes than their elder peers, which influences how they invest their wealth — and that could reshape the stock market and other investing opportunities for decades to come.

The study defined the “wealthy” as those who had at least $3 million in assets. The percentage of each generation that fits that bill breaks down as follows.

• Generation Z (ages 21-26): 1%
• Millennial (ages 27-43): 12%
• Generation X (ages 44-56): 16%
• Baby boomer (ages 57-76): 65%
• Silent Generation (ages 77-plus): 7%

Let’s take a look at how some of these investment differences among generations shake out.

How They View Investment Opportunities

Most Silent Generation folks and baby boomers built their wealth on the backs of the stock market, via traditional stocks and bonds and other traditional investments.

However, younger wealthy people have a wider variety of ways to invest, including digital assets, cryptocurrencies and more that their older peers might see as too risky.

Here are the percentages of Gen Zers and millennials (ages 21 to 43) who reported the following investment opportunities that present the greatest opportunity for growth.

• Real estate investments: 31%
• Cryptocurrencies/digital assets: 28%
• Private equity: 26%
• Personal company/brand: 24%
• Direct investment in companies: 22%
• Companies focused on positive impact: 21%
• Fixed income: 17%
• U.S. stocks: 14%

Now compare that with what Gen Xers, boomers and the Silent Generation (those ages 44-plus) said.

• U.S. stocks: 41%
• Real estate investments: 32%
• Emerging market equities: 25%
• International equities: 18%
• Private equity: 15%
• Direct investment in companies: 15%
• Fixed income: 12%
• Cryptocurrencies/digital assets: 4%

Younger Generations Have a Greater Tolerance for Risk

What this data reveals is that those under age 44 may be more willing to take chances on the types of investments that those 44 and older perhaps see as risky, new or not as time-tested.

Take cryptocurrencies and digital assets as one example. Only 4% of the older generations surveyed see those as a great growth opportunity, whereas 28% of those under 44 do.

Younger Generations Made More Adjustments Around Higher Interest Rates

Higher interest rates can be a boon to investors. Across all the generations, the study reported that 58% of wealthy people made financial adjustments as interest rates increased, including 91% in the younger generations.

The younger folks reduced spending, paid off debt, or delayed selling or buying a home, largely because younger people are more affected by debt than their older peers. 

About half of the younger investors made investment changes to capitalize on higher rates, whereas only 37% of older investors did the same, which could suggest that older adults are more secure in their wealth or possibly have less expenditures and debt.

In a snapshot, among those who are 21 to 43 years old, here’s the percentage who made these changes.

• Changed investing approach: 50% 
• Decreased spending: 23% 
• Paid off debt: 34%
• Reduced use of credit: 27%
• Delayed home sale or purchase: 19%

And here’s the percentage of those in the 44-plus set who did the same things.

• Changed investing approach: 35%
• Decreased spending: 15% 
• Paid off debt: 11%
• Reduced use of credit: 10%
• Delayed home sale or purchase: 6%

Social Media Is a Big Driver of Younger People’s Financial Decisions

Perhaps unsurprisingly, the 43-and-under set are more likely to use social media as their primary source of financial information. According to the study, 48% of the younger generations prefer social media for financial content compared with only 6% of the 44-plus set.

Those 44 and older, alternatively, prefer online articles, with 55% saying that’s their preference for consuming financial content.

What All of This Means

Why this is of interest has to do with the fact that as the Silent Generation and baby boomers pass on, they will be leaving a significant portion of their wealth to these younger generations, known as the “great wealth transfer.”

Newer technologies will shape the way the wealthy invest — and change the future of investing as well. 

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