How Millennials Save Differently from Their Parents
February 19, 2021
Millennials (born from 1981-1996) receive unending financial advice from their parents in different stages of their lives.
From the moment they bring home their first salary to the day of their marriage and the birth of their first child; Gen X parents are always concerned about the financial security of their offspring.
In their days, Gex X (born from 1965-1980) saved their money by investing in real estates, gold deposits, and post-office schemes, even cute piggy banks were their quick saving option.
Similar to their parents, millennials are also good at saving money. This report by Bank of America says millennials start saving at 24 on average, which is earlier than their previous generations. Gen X started at 30 while baby Boomers started at 33.
However, the way of saving money has changed. The main contributors to this are technological advancements and the ease of information access.
So, let’s find out how millennials are saving and why.
Where do Millenials invest to save for the future?
Health and Life insurance
The lifestyle difference between millennials and their parents is huge. They tend to eat out frequently, sleep less, stress more, and their busy schedule results in a lack of physical activity. Consequently, health issues start surfacing.
But the good thing is they realize this mistake and therefore, take up health insurances. This way, even if their health is affected or they caught some disease, they do not have to spill tons of money to hospitals.
They can save that money by invoking their insurance policy at that time.
Similarly, life insurance offers financial security to them from unforeseen circumstances. Term insurance plans are also more famous among millennials than traditional endowment plans.
Equity-linked savings schemes (ELSS)
ELSS is also becoming popular for tax savings. Equity is the perfect asset class to chase returns. In addition to that, long-term plans can withstand any market volatility to ensure you can reap the real return benefits after inflation adjustments.
Systematic investment plans (SIP)
Millennials are considering mutual funds more than their parents who used to save through traditional methods mostly. SIP allows individuals to invest a small amount in your chosen mutual fund plan regularly.
Upon activating this plan, a certain fixed amount would be dedicated directly to your bank account each month. The benefits of SIP are the convenience of getting started with just INR 100 per month, and better returns with the power of compounding.
Unit-linked insurance plans (ULIP)
Millennials have a great inclination towards entrepreneurship and risk-taking. Due to this, many of them are finding plans that can provide them with higher returns, even though there are some risks involved.
In ULIP, the investments that you make are a subject to capital market risks. Thus, when you choose this, consider your needs and risk appetite.
The benefits of choosing ULIP are the opportunity to have market-linked returns, life protection and savings, and flexibility such as switching between funds, withdrawing funds partially based on conditions, and more.
PPF and NPS
Public Provident Fund (PPF) is one of the best tax-saving options with low risks involved that even millennials acknowledge. For the financial year 2020-21, PPF offers 7.1% returns on your investment per annum.
It is a long-term investment and even extendable to five years that helps you secure your future.
National Pension System (NPS) is something millennials are looking forward to for retirement planning. This scheme is a pension cum investment that brings attractive long-term savings that is regulated-based and safe returns.
It is voluntary, meaning you can contribute whenever you want in a financial year, change the amounts, and operate your account from anywhere.
What do they save for?
Real-estate and House
All thanks to their parents, not all millennials have to worry about the roof above their heads. On the other hand, their parents battled comparatively lower disposable income and high interests.
Now, we have easy home loans, better monthly incomes, etc., millennials plan to buy real estate and luxurious homes.
Travel
Travelling industry is becoming, and a significant contribution to this are millennials. Not only are they good money savers but also don’t fall behind when it comes to travelling.
Be it bachelor/bachelorette parties, destination weddings, honeymoon trips, weekend getaways, or annual tours, they enjoy travelling across the country and even around the world. And it needs a significant amount of money for which they want to save.
Higher education
Education even from primary schools has become an expensive affair, let alone higher education. And millennials don’t want to compromise on that for their children.
Hence, they want to save money for their education for engineering, medical, business studies, and other degree courses.
To improve living standards
Most millennials have seen their parents adjusting for many things in their lives. Instead of investing money on expensive items, they used to save for the future and have a simpler life.
But millennials want to improve their living standards like buying cars, eating out in restaurants, buying apparels frequently, partying with friends, gym memberships, and so on.
Conclusion
Millennials have better choices than their parents had owing to this technologically advanced world. They can easily access online marketplaces, easy home and car loans, online banking, financial information, and more.
Although they have a positive attitude towards saving money, they also want to explore the world and have fun with friends and family. It’s more like maintaining saving-expenditure balance.