How Your Financial Future Will Be Nothing Like Your Dad’s
Father’s Day is a time to celebrate fathers and families, traditions and changes. But some traditions are changing faster than others — especially where money is involved. One thing that good fathers have been doing for generations is passing down their knowledge of saving, spending, investing and earning. Some of those lessons are timeless. Others are quite temporary.
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The most obvious change that today’s young people will notice about money compared to generations past is the form taken by the money itself.
“The immediate financial future for young people will no longer be held in cash,” said Scott Nelson, founder of MoneyNerd. “Already today and certainly in 10 years’ time, young people will not ask their parents for a couple of dollars to run down to the shops but instead, their allowance will be added to a card and the child will use Apple Pay to buy their sweets. Even further into the future, I imagine cryptocurrency will take over entirely from cash, but more so now from contactless payments and smart accounts. Once crypto settles down, prices become tangible to goods and mining becomes sustainable, kids won’t be paying with crumpled up notes or warm coins from being held tight in a kids hand, but from watches, microchips, and using original-mined cryptocurrency — a little different to 25 years ago.”
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There was always a class of conservative investments that generations of Americans shifted to as they aged. Some of them are already cruising toward obsolescence.
“When my dad retired, he could take out an annuity that gave him a return that was comfortably above the rate of inflation,” said Simon Popple, author of the Brookville Capital Intelligence Report. “Bonds and other low-cost fixed income instruments also paid a decent coupon. That’s no longer the case, so the younger generation needs to be more creative about how they create wealth. There are many of our father’s footsteps we want to follow, but this is not one.”
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In Your Dad’s Time, Investing Was Not for the Everyman
Today, kids just out of high school can get invested in the stock market with pocket change — literally, with apps like Acorns — or with just a few bucks through a free online broker. Until fairly recently, that was the stuff of pipe dreams.
“These days, anyone can easily invest,” said Alexander Lowry, executive director of the Career and Connection Institute and executive director of the Master of Science in Financial Analysis program at Gordon College. “There are no barriers to entry. The cost to trade stocks is zero for so many brokerages. In fact, it’s even fun to trade. The Robinhood app is built like a game — and you don’t need much money, as on their platform you can buy fractions of a share.”
Back in your dad’s day, however, savings accounts were for regular schmos. Investing was for the elite who could afford it.
“Compare that to when my dad was investing,” Lowry said. “In 1970, with inflation and lousy returns ravaging the markets, the New York Stock Exchange imposed a $15 transaction fee on stock trades. The cost of trading 100 shares of a $20 stock went up around 50%. What a terrible deal for individual investors.”
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Achieving the Dream of Homeownership Was Less of a Nightmare for Your Dad
If you believe what you read on Facebook, boomers love nothing more than crabbing about those pesky millennials — who are as old as 40 now, by the way — cruising their whole lives on Easy Street. However, it seems their memories are often selective.
“Your father thinks you have it easy, but forgets he was part of a generation that could buy a house on a wage from unskilled work at 21,” said Dubai-based financial consultant Shauna Callaghan of Another Day Another Dirham. “In that vein, it’s your father’s generation refusing to reduce any gains on their property that leaves you unable to afford to buy a home of your own.
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Another difference is the way you’ll make the money to buy that house compared to generations past.
“Your father more than likely headed off each morning to the same job for decades,” Callaghan said. “You, in turn, were taught to seek fulfillment, follow your dreams, and make a difference. Employers these days hire slow, fire fast, and don’t care too much about your aspirations. Job safety, massive pension contributions, and loyalty don’t exist for you like they did your father.”
Also, the dollars earned at those jobs now buy a whole lot less.
“Inflation existed in your dad’s days as it does now,” Callaghan said. “Although 2% of $0.83 isn’t as noticeable as it is on $3.60 per gallon of milk. Your problem is that wages haven’t inflated along with prices. It’s not that prices have increased, your spending power is decreased and your ability to spend is inhibited by a stunted salary.”
Finally, this generation’s entrepreneurs — just like this generation’s investors — face far fewer barriers to entry and have a much better shot at actually leaving their jobs and bosses behind.
“Starting your own business is easier, cheaper and a more realistic option for you than it was for him,” Callaghan said. “Billboards and TV ads aren’t necessary anymore. Social media has made everything faster, cheaper, and more accessible.”
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