We must create hope for future generations

In a recent survey undertaken and published by Facebook, it found that millennials felt they had no one to turn to for financial guidance.

 

MoneyWhizz - Millennials

Too many costs and too little income makes to near impossible for future generation to get ahead financially.

Across the globe, financial service organisations are spending untold sums attracting millennials for a vast array of services, including savings to buy a home and planning for their post-employment years. But most are missing out on a critical point, and this is especially important for many banks and credit unions; millennials still want face-to-face communication.

There is growing evidence that so-called ‘Robo advisers’, online investment services that offer to remove financial advisers are not the be-all their founders envisaged. Having written about this in the past, before the recent Facebook analysis, I said the role of the financial adviser had not gone away. Facebook has simply confirmed that personal advice on critical financial issues still requires personal intervention. Millennials want answers to their money questions from someone they can connect with. Unfortunately, this is precisely where financial advisers often fall down, especially when they use language so riddled with financial acronyms, they can often confuse their audience. Financial advice is artful mix of the science of knowledge (products) and the art of communicating. Advisers must master both! But there is also a big lesson for banks here. As many have scaled back their branch network, they may be going against their own long-term success, especially when it comes to more profitable financial advice services.

When it comes to finances, the situation for many millennials today is complex. Several high level reports highlight the growing disconnect between the earning power of millennials against the rising cost of buying a home, paying off college debt, starting a family as well as saving and planning for their post-employment years.

A common problem in Ireland, large parts of the UK and major metropolitan areas of the US, rising rents are suffocating the finances of millennials that aspire towards normal things in life; a place of their own, family and financial security. Coupled with more restrictive bank lending, stagnant wages and rising costs, millennials have more costs eating into less income. As a result, there are fewer prospects of securing a mortgage today than at point over the past 30 years. And this really does matter. Homeownership is a key pillar of financial well-being but by placing it beyond the hopes of millennials; many see little point saving in the first place. A lot of work needs to be done but education supported with fair tax benefits would be a good starting point.

On the matter of long-term savings and post-employment financial well-being, a lot could be achieved quickly. The discrimination of age-based tax relief limits favouring older workers must be abolished – wouldn’t it be great if millennials actually reached their personal fund thresholds (PFT) before they retire! Time is a powerful means of growing personal wealth and encouraging those with time on their side to take part in saving could be encouraged through financial education, and of course, tax relief. After all, dated pension rules that were conceived in an era of defined benefits – where employers provided pension guarantees are no longer fit-for-purpose in an era of defined contributions where the risk falls to the individual. Today, we must all not only save more for longer, we also need to have a grounded understanding of investing, and again, education can play a major role here.

Future generations must be treated fairly. At present, they are being marginalised when it comes to financial opportunities. We should start by offering some decent tax relief to encourage them to participate in building the pillars of their long-term wealth.

Of course, it’s not just the millennial generation that need support but the ones coming after them also.For the present though, financial education presents an ideal opportunity to merge a real benefit with the right opportunity.

Frank Conway is the founder of MoneyWhizz, the financial literacy initiative. 

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