How Good Millennial Money Habits Could Impact the Economy in Years To Come
Millennials, many now in their 40s, tend to be associated with negative financial stereotypes. Despite being frequently dinged as the generation that would rather spend money on avocado toast and lattes than buy a house, most millennials have good spending and savings habits.
While millennials do face their fair share of challenges, including paying down student loans and inflation, their positive money habits are good models for future generations. Here are some examples of good millennial money habits and how they could impact the economy in years to come.
Prioritizing Financial Literacy
If millennials aren’t familiar with an aspect of personal finance, they will take the steps necessary to educate themselves about it.
Matt Gromada — managing director, head of youth, family and starter banking, at Chase — said millennials are the first generation to be raised with personal computers, smartphones and text messaging. Rather than rely on their own knowledge, Gromada said millennials are not afraid to ask questions and turn to an expert.
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Using Tech To Budget and Save Money
The tech-savvy nature of millennials means using several tools to better manage their finances.
Michael Collins, CFA of Endicott College, said millennials take advantage of budgeting apps and online banking services to better track their income and stay within a budget. Millennials understand it’s important to comparison shop and will use technology to maximize their savings.
Budgeting and saving money are positive money habits for future generations and the economy. Collins said these habits ensure money is being used responsibly, and money is flowing throughout the economy and being used for productive purposes. Future generations, like Gen Z, will view the careful budgeting and saving habits of millennials as models to understand the importance of financial planning.
In addition to being good at saving money, including getting a headstart on retirement savings, millennials are also motivated to invest early.
Financial literacy coach Nicole Christiano said millennials tend to be more socially conscious and environmentally aware than previous generations. They often prioritize sustainable and socially responsible investing and will be likely to invest in companies that align with their values and support sustainable practices.
This behavior is not specific to millennials in the United States alone. In Canada, Tatiana Enhorning, financial advisor at Turner Investments, finds several of her millennial clients are motivated to save and learn about investing early.
“They tend to be savvy about their investment vehicles like balanced and diversified ETFs, and ask the right questions around fees,” Enhorning said. “They have an open mind to learn about the modern world of investing with the help of a financial advisor and are often eager to learn about the markets.”
Mastering Intentional Spending
When it’s time for millennials to spend their money, they are doing it from a place of intentional spending.
Dr. Chris Courtney — cognitive neuroscientist and senior vice president of science, risk and analytics for Happy Money — said intentional spending is when you take inventory of your spending and see what you spend money on that makes you happy. This gives you the space to spend money on what really matters to you.
For millennials, this means spending money on experiences with lasting memories like concerts.
Much like the millennial generation being called out for spending too much money on lattes, a common misconception is it’s a mistake to spend money on experiences. However, Courtney said millennials are excellent at understanding the power of purchasing experiences.
“Shelling out top dollar on tickets to see your favorite band comes with an entire journey of enjoyment. After purchasing the tickets, you can experience days, weeks or months of anticipatory joy as the day of the event approaches. The event itself is where you make memories and the happiness continues as you relive the event through the stories you tell,” Courtney said.
Intentional spending also carries a ripple effect through a millennial’s personal finance journey that puts them on the trajectory for future success. Through intentional spending, Courtney said you’re able to maintain a positive cash flow. This correlates with many positive financial and psychological outcomes which are good for millennials and the economy at large like increased levels of life satisfaction, positive mood, optimism, resilience, more savings and higher credit scores.
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