Millennials don't save, buy a house like older generation: Here's why

A reader wrote to me about a problem he saw around him: The younger generation is not bothered about saving money. At least not enough by his standards. He wrote in detail about his struggle to rise from his humble background, and how the modern children don’t value those things. We were a better generation, he argued. The current crop of youngsters is set for doom. I told him I would write a column in reply and here it is.

It is quite common for the older generation to presume that the younger generation is set on the wrong path. This story is thousands of years old. No elder has taken the different behaviour of the younger kindly. The problem is that one cannot judge the future based on the past. As Khalil Gibran famously noted: “ For their souls dwell in the house of tomorrow, which you cannot visit, not even in your dreams”. Elders do not know. They have no window to the future in which the next generation lives. Even if they protest that observation.

To save is to provide for a rainy day; to create a buffer when things go wrong; to set aside something when things are bleak. Saving comes easily to a generation that grew up in scarcity; uncertainty; poverty; unemployment and all those negative events that create fear of the future. One always wants to prepare for the worst. A generation that has grown up amid plenty, experienced mostly positive things, is unlikely to be goaded by fear to save. Economic prosperity has triggered consumption over savings.

The motivation to save can come from positive objectives about living better, retiring early, switching careers, and so on. Fear is not an emotion someone with confidence feels much. There will always be a job to do, and money to earn, is how a younger person views the world. They believe there are opportunities to capture and move ahead. They are not imprisoned by the ideas of the past.

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When my protesting reader was young, getting a job with the government, or a public sector bank, was valuable. Security, pension and such motivations pushed a generation of youth in the 1970s and 1980s to seek these jobs. Much as we peddle nostalgia for the past, these jobs don’t attract the youth of today. While many elders accept that job markets have changed, and are very proud of the fancy salaries of their children, they fail to see that these very qualitative changes in the job markets have modified the notions of the young about income, spending and saving.

Elders also fail to see that what mattered most to them might not matter at all to the youth. There is so much emphasis on “settling down” equated mostly with getting married, buying a house, and raising a family. These are no longer the priorities of the youth. In a global environment where one can work from anywhere for any firm, in any nationality, youth do not see the need to associate with a concept of home town, nor are they enamored by the idea of settling down.

Owning physical assets such as property might have been the marks of wealth to an older generation. The youth do not measure success that way. They cannot, as my reader wanted his son to do, invest in a house they see as unimportant and unnecessary.

What did the elders do with their savings, ask the youth. As we stare at a generation of elders, who have worked hard,denied themselves several joys, and built a historically high hoard of inheritance for the next generation, the youth ask if this was even needed. Why save and set money aside for a cause that is not so important? Many young earners begin their lives with an income much higher than what their parents earned at the end of their hardworking and successful careers.

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As the next generation systematically does better than the previous one, this notion of “providing for the children” becomes superfluous. The young are unable to see why such hoarding might be needed. More and more of the older generation realise that they may have pushed out their fun and leisure activities too much into their old age, and that they are unable to use their savings optimally.

Which is why the youth question a saving paradigm based on martyrdom and sacrifice. They believe that work and life must be balanced. They like the notion of spending a well-earned income on something they fancy. They like to spend rather than save too much. The elderly are dismayed at what they see as consumption culture, low emotional intelligence, or carelessness about the future. If the youth see borrowing as a way to leverage others’ money, the elderly see it as a reckless money habit.

Attitudes about money and life are shaped by one’s personal experience. Upbringing matters too. But many children that disapprove of a conservative attitude to money, might want to not be like their parents. Many parents are surprised and shocked when they find out what their children picked up from them, and what they discarded. Some money habits are passed on; some are rejected. But parents do not control which ones these are.

The younger generation has its world to pick its cues from. Any amount of career advice from elders is likely irrelevant compared to what their peers say, for example. Parents that fret about how their child will live and study in a new city, do not know how efficiently the online groups solve for it; traditional parents that still try to find a marital match for their children, must take a look at the efficiencies and ethics of the modern dating websites. How the youth solve a problem they have to deal with, is driven by the energies and innovation of their collective intelligence. Elders can’t match that easily. Experience, perspective, age and all these merits of the elders are valuable. But they may not always be useful or relevant.

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The youth will deal with money the way they deem fit. If they must save, they need the motivation that matters to them. The stimulus needs to come from their worldview and their sense of priority. The elders may not have a role in that process, much as they dislike it.

(The writer is Chairperson, Centre for Investment Education and Learning)

Read a contrary view: Why optimism about returns is not a good idea



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