Millennials are used to being blamed for a lot. After all, they are purportedly responsible for killing Big Macs, focus groups, marmalade, department stores, handshakes, breakfast cereal, homeownership and even serendipity. The list is prolific, but on January 1, 2020, Business Insider finally declared “the decade of millennials killing things has come to an end.”
It hasn’t. A recent Fortune Magazine article shows that the generational blame game is still alive and well with its own headline: Millennials Are the Reason You’re Paying Sky-high Prices for Everything These Days. Speaking on CNBC, Bill Smead of Smead Capital Management, maintained that Millennials are to blame for high inflation because of an abundance of cash they’re spending on a limited supply of houses and cars. “Okay boomer.”
There are a number of legitimate reasons for high inflation (you can read about one major factor here). Pinning the blame on a generation finally able to consider home ownership after years of paying down student loan debt is, in my opinion, grasping at low hanging fruit. Are we really meant to believe that the tired stereotype of a lazy, entitled Millennial has suddenly emerged from their parent’s basement bearing wads of cash to wreak inflationary havoc as a last murderous act? Wasn’t killing the Big Mac enough?
Making Change
Couched as financial analysis or not, judging other generations through our own generational framework is a natural inclination. I found myself doing much the same recently.
While making a small purchase that came out to exactly $8.50, a Gen Z cashier apologetically informed me that they were only able to accept cash. “I have to do everything old-school,” the cashier lamented as he tapped away on his iPhone calculator app. He computed the correct change of $1.50, popped open his cash drawer… and handed me one dollar and one nickel. So close. I paused, giving him the chance to dive back in for the additional $0.45. When he didn’t, I gently prodded, “I think you’re a bit short.” “Oh, my bad,” he replied and handed me an additional dollar.
My immediate response was to conclude that Gen Z was killing the art of making change. It was a fleeting thought. I knew deep down that this poor cashier most likely couldn’t make change because Millennials had undoubtedly killed that art years earlier.
Winds of Change
While blaming other generations for a changing financial landscape is natural, the past decade has shown that is not terribly constructive. What can be constructive is recognizing that there are differences in how generations use money, and how to constructively engage those differences as we interact with them.
The Pew Research Center separates generations by the following birth years:
- 1946 – 1964 – Baby Boomers
- 1965 – 1980 – Gen X
- 1981 – 1996 – Gen Y (Millennials)
- 1997 – 2012 – Gen Z
A study in the International Journal of Business reveals that Baby Boomers are more likely to own financial securities than Millennials. Millennials, though, are more likely to own financial securities than Gen X. As the youngest investors, Gen Z so far, appears to fall somewhere between Baby Boomers and Millennials with financial security ownership.
Generations show a tendency to stick with investments they are familiar with or rose to popularity when they first started investing. Baby Boomers show the greatest investment concentration in stocks and mutual funds, while Gen Z owns the highest percentage of cryptocurrency. Millennials lean toward values-based investments more often than other generations, and make up the largest generational block invested in Socially Responsible Investment strategies.
Another interesting dynamic is the seemingly misaligned risk tolerances and time horizons among generational cohorts. Baby Boomers have the shortest time horizons but are most likely to identify as “aggressive” investors. Meanwhile, Millennials most often identify as conservative investors while having much longer time horizons. If nothing else, Bill Smead was right about one thing: Millennials do favor cash as an “investment.” Gen Z shows a healthy appetite for risk, while Gen X remains fairly risk averse.
There are numerous dynamics at play with generational investing. Are Millennials risk averse because of coming to age during the 2000 dotcom crash and Great Recession? Conversely, do Gen Z investors own more stock because their formative years coincided with the longest bull market in history? Are Baby Boomers willing to take on more investment risk because of the inherent security they experience as recipients of pension plans that are largely unavailable to subsequent generations? Are some investment or risk selections made as a subconscious separation from the way a generations’ parents invested?
The More Things Change, The More They Stay the Same
It’s easy to make assumptions about any one of these questions. In this case, though, assumptions about differences aren’t nearly as important as a simple acknowledgement that they exist. Ultimately, investors are seeking the same thing regardless of the type of investments they choose: financial security.
The job of a good financial advisor is uniting this singular motivation with a client’s unique investment preferences. At times, this means taking on the role of a behavioral coach while educating and alleviating concerns. It also means resisting the urge to simply push clients into “appropriate” investments if they’re not comfortable or ready for them.
Investors, on the other hand, should be willing to explore what motivates their investment inclinations and be open to new solutions or ways of investing. Each generation has a distinctive investment footprint.
When it comes to the Big Mac, reports of its death may have been greatly exaggerated, but those obsessed with checking the pulse and assigning blame for the death of a burger that is responsible for its own share of heart-stopping, will no doubt continue to struggle with change as subsequent generations shape the future of our financial landscape.
