The oldest generation of baby boomers today might be facing a difficult retirement phase as most of their money might have been lost during recession. Despite this, it is Gen Y that is subjected to the most uncertain financial future. This isn't because of their irrational spending habits as they are accused of, but it is a combination of different characteristics like income, spending, and age.
As per the Federal Reserve's recent study, millennials around the world today are spending less on products and services because they earn or accumulate less money than the previous generations generations.
Millennials also referred to as Gen Y, are born in the years between 1981 and 1996. The authors of the Federal Reserve's paper said that millennials today are financially less well-off than their counterparts from the previous generations. This generation under consideration has been found out to have fewer assets, lower earnings, and lesser wealth, which is believed to have affected their spending habits.
Money spending habits of millennials
Refraining from long term investments
Adding fury to the flames are millennials' unwanted financial habits like turning away from investments, stockpiling cash, and relying on savings instead of growth options. According to a UBS study, an average millennial majorly plans for short term goals as they believe retirement to be a very long term goal. Still, a majority of them prefer timing the market and investing in safer instead of high-risk assets.
Storing cash at home
Recent trends testify to the poor spending habits of millennials with visible results. It is observed that the people aged 25 to 40 are investing just like their grandparents who suffered from the financial consequences of the Great Depression did - by choosing mattresses to store money instead of bank accounts. Such measures are only leading to increased wealth differences between the old and younger generations.
Purchasing using credit cards
A survey by a group at the American Institute of Certified Public Accountant (AICPA) concluded that more than a three-quarter of the millennial generation prefers buying cars, devices, and clothes just like the ones their friends have. These people also prefer buying daily requirements like groceries and food using credit cards which have led to the problem of late payment and financial dependence on parents for more than 25% of millennials.
The study by the Federal Reserve says that the millennials today are fairly young to be analysed accurately. The permanent effects of their preferences are yet to be seen.
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