Financial woes among younger investors mean delayed milestones

Baby with money bag small cropped-293Younger respondents in a recent survey sponsored by Boston-based MFS Investment Management, reported that they were highly likely to avoid decisions like career changes, home purchases, moving and household formation because of financial stress, even as they approach middle age.

According to the 2017 MFS Heritage Planning Survey, 80 percent of Millennials, (defined as those age 21 to 36), have either delayed, or said that they expect to delay, a major life event. Already, nearly a quarter of Millennials have delayed having children and purchasing a home.

Overall, six in 10 of the survey’s respondents said that they have delayed or will delay a major life event because of their current financial situation.

Research in New Zealand indicates that similar things are happening here with our Millennials. The lifestyles, interests and attitudes of those in their teens, 20s and even 30s are quite different from that of baby boomers. For baby boomers, early adulthood was fairly standard - get educated, work, marriage, work. These days there is no typical life journey, and according to many recent studies, progression from youth to adulthood is taking longer, with a significant impact on the wealth of the younger generation.

There is a growing generational wealth gap between the old and the young - a function of financial, cultural and even emotional factors.

According to a CNBC report, sociologists have boiled down the basic milestones in the journey from youth to adulthood into five events: graduating from high school or university, leaving your parents' home, paying your own way, marrying, and having a child.

These milestones are taking longer to achieve if they're achieved at all, and it is not just affordability causing the delay.

It has become more culturally acceptable to keep on studying or go back to study while you "find yourself". Increasingly, young adults are coming back home to live with their parents and the median age for marrying and having children has increased.

The notion of paying your own way seems less important to the young people of today and, interestingly, parents will often exacerbate the situation, letting their offspring live at home without any financial or practical contribution to the household.

In the US, 40 percent of people in their 20s move back home with their parents at least once.

Two-thirds spend at least some time living with a romantic partner before marrying, and couples today generally don't expect to marry until their late 20s or start a family until their 30s.

Some of this "deferment of adulthood" will be for financial reasons. But in many cases, it is a lifestyle choice rather than a financial one. Unfortunately, deferring adulthood because you can't (or don't want to) afford it makes it harder to build wealth when you eventually reach adulthood.

Young people today say "it was easier for your generation to build assets than it is for ours". There may be an element of truth to this, but the main reason older people are wealthier than younger people is they have been working longer. The longer you work, the more money you're likely to have. The longer you defer working, the harder it will be to accumulate wealth.

Given that the trend of delayed adulthood seems entrenched, what can be done to close the generational wealth gap? Basically, the Millennials need to create a deliberate plan and set of expectations for life’s journey then implement it. Whatever they choose is fine provided they are financially self-supporting and do not expect to have the level of material wealth of previous generations without having done the ‘hard yards’ of working and saving to achieve their desired financial goals.