Millennials and their money
The money lives of the 'Millennial' generation are being scrutinised by companies as they begin to make their financial power felt.
Much is being made of the special characteristics of Millennials, born in the 1980s and 1990s, almost as though they were a new species of human, one that's half person, half mobile device.
Millennials largely share the same financial goals and desires - such as home ownership - as previous generations.
But study after study has been done on this generation to try to find out what makes them different, and how best to appeal to them. New Zealand research gives us many insights into their money lives.
HOW THEY SHOP
Millennials are a nightmare for traditional retailers. They have little brand loyalty, and have developed the tricky habit of using mobile phones to check whether the prices in a store are reasonable. That's something half admitted to doing in a 2013 study done by marketing intelligence company Aimia. The use of mobile technology is the defining feature of the Millennial generation.
Research indicates Millennials are also more price conscious over certain purchases. However, they often won't stint on updating their mobile tech or spending on high-status consumer items their peers approve of.
But they appear to be less quality-focused than older people. They are big online shoppers and put a lot of trust into what their peers are saying about companies and products on social media.
Millennials are more likely to be early adopters of technology, which leads older generations to frequently criticise them for constantly needing to have the latest mobile device, regardless of what it does to their bank balances. And retailers be warned, when annoyed there's a good chance they will protest on social media.
And they won't pay for certain things like having TV piped into the house, because they consumed programmes online. Research in the US by Nielsen established that TV teetotallers were more common among the millennial generation.
Millennials are supportive of KiwiSaver, research from fund manager Mercer shows. They see it as their salvation. That's not surprising because, as Peter Nielson, chief executive of the Financial Services Council, says, surveys show confidence in the continued existence of a universal pension is lowest among the young. Student loans and high house prices have taught them society has no problem stripping them of benefits previous generations have enjoyed.
A survey by the Financial Markets Authority showed Millennials were marginally more likely to see shares as "high risk" than older people, and the same went for KiwiSaver Growth funds. But they are taking on a decent level of KiwiSaver investment risk, with many choosing set-and-forget "lifestages" funds, which gradually de-risk as investors age.
"70 per cent of those aged 18-34 are in Lifestages," an ANZ spokesman said. "Generally this means younger people are invested in higher growth funds, and are moved to more modest risk profiles as they get older."
Those that choose conservative funds do so for a reason. "Our team of Authorised Financial Advisers at ANZ Wealth Direct tell us that when people are planning to buy a home in the next five years, they are keen to have their KiwiSaver money in a conservative fund so they can lock in more certainty around the balance."
Not all do that. "The 18-34 age group made up 71 per cent of First Home Withdrawals in the 12 month period to November 2014," the spokesman said, and: "Of the First Home Withdrawals in the 12 month period to November 2014 for 18-34 year olds, 73.5 per cent were invested in the Growth Fund."
There's a notion that we may be experiencing "peak car", which is the high point in car use in our society. Part of that debates centres on Millennials and their attitude to motors, and most especially the cost of running the things.
While previous generations saw cars as a means of extending their personal freedom, fewer Millennials seem to see benefits in even getting licences.
New Zealand Transport Agency statistics show the number of driving licences held by 16 to 19 year olds has declined across the country over the five-year period 2008 to 2013.
Auckland had a 21 per cent decline. Wellington was down 56 per cent. Dunedin and New Plymouth had 25 per cent drops.
And, licences held in the 20 to 24 age group have increased at a slower rate than the increase in numbers in people of that age in the population. Research by University of Otago PhD student Aimee Ward found younger Millennials were baulking at the cost of running cars, but also found many ambivalent about driving at all.
Nobody would seriously suggest Millennials want to rent for life, but that future beckons for many.
There is fuzziness about home-ownership numbers, but the trend line for the young is heading down as prices head up. Statistics NZ says in 2013, 49.8 per cent of people aged 15 years and over owned or partly owned the home they lived in, compared with 53.2 percent in 2006.
"The largest falls were for those in their 30s and 40s. In 2013, 43 per cent of people aged 30 to 39 years owned their home, down from 54.6 per cent in 2001.
In Generation Rent, published earlier this month, by economists Shamubeel and Selena Eaqub says this leaves many Millennials bereft of "both social and financial security".
For younger Millennials owning a home in a major town or city at all is increasingly dependent on getting parental help. The Eaqubs say in 2001 nearly half of those aged 30-34 owned homes. That had fallen to 36 per cent in 2013.
In its New Zealand Millennial Loyalty Survey 2013 Aimia identified the key things Millennials wanted from rewards. Key conclusions were that Millennials were very value-focused, and expected to collect rewards rapidly. They needed to see rewards within 30 days, or the rewards offerer risked losing their attention. New Zealand Millennials are more likely than many of their overseas peers to join rewards schemes. And, Millennials don't expect to pay fees to join a rewards scheme. Aimia found Millennials were much less worried about data privacy.
Older generations seem to view Millennials as work-shy, narcissistic, and possessing a sense of self-entitlement. PWC's global Millennials at work survey certainly suggested Millennials were motivated by having a decent work/life balance, and that many had not found their expectations met.
It's a generation where income is very unevenly split, but many can expect high salaries early in life. Around a quarter of those aged 20-34 earned $40,000 or more at the point of the 2006 Census. The 2013 Census showed that had risen to over a third. But, Statistics NZ says, the median personal income for the 20–24-year-old age group decreased by 4.8 per cent between the 2006 and 2013 Censuses.
Despite that, the latest General Social Survey shows that in 2014 60.2 per cent of 25-34 year-olds said their income was enough, or more than enough, versus 28.7 per cent who said it was just enough, and 11.1 per cent who said it wasn't enough. In 2010, those figures were 47 per cent, 35.8 per cent and 17.1 per cent. Assuming the surveying was consistent, that indicates day-to-day living has got easier.
Millennials are not slaves to traditions, and if they don't have to spend on something they can do themselves, there's a high chance they won't. Expect Spotify play-lists not a DJ, for example. Millennial weddings range from opulent to $50 registry office quick-hitches. NZ Weddings Magazine says its readers spend an average of $38,000 on their wedding and honeymoon. Statistics NZ says that in 2014, the median age at first marriage was 30.2 years for men and 28.7 years for women. In 1971, it was 23 years for men and 20.8 years for women. They are also having kids later.
The young are supposed to feel bullet-proof, but there's actually an increase in the proportion of Millennials buying health insurance. New-style, chopped down, cheaper health insurance policies have been launched in recent years, and between 2010 and 2014 there were modest rises in the proportion of people in those age brackets with health cover.
- Sunday Star Times