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Four Habits Making Some Millennials Rich
There have been countless stories and studies about the financial woes faced by millennials, a generation saddled with student loan and credit card debt and struggling to recover from the Great Recession.
Yet earlier this year Bank of America released a report revealing that 47 percent of millennials have $15,000 or more in savings and 16 percent now have savings of at least $100,000.
In addition, 67 percent of millennials who have a savings goal stick to it every month (or most months), and they also tend to live within their budgets with equal dedication. A staggering 73 percent report adhering to their monthly spending plans.
While there has been some skepticism about the Bank of America report, the fact is, millennials may be getting a bad rap when it comes to their personal finances. As the report states, “Millennials are actually just as good, or better, than other generations when it comes to managing money, and they are getting their financial houses in order.”
In fact, some financial experts say millennials, thanks to their unique approach to life and personal finances, are doing extremely well for themselves, with a small percentage already achieving millionaire status. Here’s a look at four habits that experts say are helping to make millennials rich.
Understanding and Using Technology
Perhaps the most important distinction of the millennial generation is their inherent understanding of technology.
They’re a generation who grew up with computers and amid the digital technology boom. As a result, millennials are not only comfortable with technology, they’re extremely savvy about its substantial capabilities and its use permeates all facets of their life.
“We love using technology to our advantage,” says Chad Rixse, co-founder of Millennial Wealth. “This can translate into plenty of financial success, whether it’s using tools to manage your finances or starting a technology-focused business.”
In fact, according to a study from Accenture, millennials are, by far, the most digitally savvy investor group overall.
Not only do millennials make full use of technology, they’re also very demanding and educated customers when using it, says Colin Kennedy, CRO and COO of Clarity Money, a personal finance app used by more than one million consumers, most of whom are millennials.
They embrace technology for saving, budgeting, and investing on their terms, and expect digital finance tools, and institutions, that are unbiased, objective, and transparent. And unlike previous generations, they’re quite willing to turn their backs on providers who don’t clearly represent their best interests, including those who charge fees they think are too high or try to sell them products they don’t need.
One more point about millennials and technology: They embrace it because they realize that algorithms and software are often more efficient than humans, says Priyanka Prakash, a financial and business writer for Fundera.
“For example, when a millennial shops around for a credit card, they could visit or call around to a bunch of different banks and find out each bank’s offerings, or they could do the much smarter thing–log onto a financial platform… where they can see all the cards and their offerings in one place,” says Prakash.
More than any generation before, millennials are feeling empowered to pursue dreams of financial freedom by owning their own business. That’s due in large part to their intuitive comprehension and adaptability of new technologies, says Ryan Burns, founder and principal of Texas Hard Money, an equity-based lender.
“By embracing all of the benefits of having a world of information at their fingertips, (they) feel more capable and less daunted by the idea of starting a business,” explains Burns. “Millennials set a great example of how to evolve with the times and excel by way of adaptation.”
In addition, the technology available today has changed the way millennials are operating their businesses and the amount of money they need to get a company off the ground. The need for large initial investments or a big support staff has largely been eliminated.
“Millennials have grown up, for the most part, in a globalized economy with ever improving platforms, such as web 2.0, to launch a business off of,” says Joshua Schumm of Kansas Financial Coaching. “Gone is the need for long-term relationships with suppliers for preferred production speed and pricing – agility is now favored over that. They realize that the customer, just like them, wants things now or very soon. They’ve just realized this and utilize the proper, ever-evolving tools that enable them to serve their customer’s wants well.”
And one last note about starting their own businesses: Millennials boldly do so because they see it as one of the surest ways to secure their future. “I have seen first-hand that working for yourself and not counting on others for your financial future is a necessity in the modern economy,” says Lillian Karabaic, a millennial who hosts the weekly radio show Oh My Dollar! in Portland, Ore. “As a generation that largely graduated into a recession where full-time jobs with benefits were mythical, many of us got thrown into juggling gig economy roles to make ends meet while we waited for the supposed steady job to arrive.”
In the end, many millennials decided the best way to secure their finances was to take it into their own hands, said Karabaic.
Using Technology and Social Media to Network
More than nine in 10 millennials (92%) own smartphones, according to the Pew Research Center, and the vast majority (85%) say they use social media. By many accounts, millennials are using these platforms to network in ways previous generations did not.
“Accomplished professionals are now easily accessible to millennials who intuitively rely on their smartphones to communicate directly with these experts via social media and other networking applications in hopes of gaining some insight into their success,” said Burns, of Texas Hard Money.
Watching Every Penny
One more pronounced millennial habit empowered by technology: For all the talk of avocado toast, in reality they often watch every penny and are not hesitant to cut even the smallest expenses from their budget.
“You’re fooling yourself if you think millennials don’t care about finances, they clearly do,” said Kennedy of Clarity Money, who said a lot of millennials adopt their app just to cancel unwanted subscriptions.
“It may be just $14 a month, but that’s $160 a year,” he said. “Millennials will focus even on that $14 or $15 charge because they know that it represents a couple hundred dollars over time.”