Are Millennials Really The Go Nowhere Generation

Millennials and Gen Z: Why the pressure is on when it comes to money

The generations of current young adults have a harder time building wealth than their parents: not only are costs rising and negative interest rates rising, but pension security is also falling.

On the flip side, it's the first generation who have easy digital access to invest in stocks and crypto.

Business Insider spoke to influencer Luisa Lion (31) about her way of building up wealth by buying real estate and to Professor Klaus Hurrelmann about the pressure that this generation is under.

If you follow Luisa Lion on Instagram, you will learn a lot: about preparing vegan schnitzel, how to conjure up an artistic ponytail without a hair tie or what her little dog Leo can do.

But recently, the profile of the fashion and beauty blogger has been about another topic: stocks and crypto. The 31-year-old Luisa Eckhard, the real name of the influencer and founder of the marketing agency Preach Media, takes her more than 330,000 followers into the world of systems - and shows how she invests money herself.

Entry with individual shares - and profit straight away

“I'm not a financial blogger,” she said in an interview with Business Insider. “I also don't follow any of the well-known hedge fund strategies when investing, but rely on personal discussions and experience.” Eckhard invested in her first individual shares in March last year via a trading app, with a “small amount of money” she bought one share each Tesla, Amazon, Google, Paypal, Microsoft, LVMH - “from all companies that I know from my everyday life,” says Eckhard. Then she dropped her shares for the time being - and when she checked again, there had been a split on her Tesla share, one share had become five and the price had risen. The 109 euros invested had amortized to 3000 euros. Eckhard calls it “beginners' luck”.

However, Eckhard does not have so much beginners' luck, but rather well thought-out planning in one area that she has planned for her retirement provision: real estate. The 31-year-old now owns three apartments in Hamburg, two of which are rented, and she lives in one. Her mother's tax advisor brought her to buy the apartments - and her own mother, who had also bought a property as security. "My mother came along to the viewings and asked all the right questions - that was a great help," says Eckhard. A purchase that was worthwhile: With loans with interest rates between two and one percent, says Eckhard, she got off better than her parents, who 30 years ago still had to pay off a whopping 9.8 percent interest on their real estate loan.

Millennials rely on their parents - despite digital tools

But is the Millennial generation in general really better off financially than their predecessor generation?

Professor Dr. Klaus Hurrelmann from the Hertie School of Governance has long been concerned with Generation Y, the so-called Millennials, who were born between 1985 and 2000, and Gen Z, who were born afterwards. Both generations face and approach similar economic problems. His conclusion: “Overall, the under-30s have worse cards in a generational comparison - if we exclude the 20 percent who will inherit a lot. Income is structurally lower, with higher running costs and no security in old age. In general, they cannot afford to save big, even though they know they have to - because they are losing their retirement savings. "

Mooring, as Eckhard describes it, is a typical trait of this generation. “These young people are still very much oriented towards their parents and their advisors in their financial behavior - these are the most important sources. Although you have the digital possibilities at hand, it is difficult to assess what is trustworthy and what is not on the Internet, ”says Hurrelmann. Conventional consultants, i.e. banks and insurers, are just as difficult to assess. Hurrelmann: "This generation senses from the first contact with these institutions that there is a lot of bureaucracy lurking there."

Even Eckhard could no longer imagine going to a bank branch for a share custody account. “As a child, I used to have a savings account and I remembered going to the bank to deposit money on birthdays. For a while I also had a bank advisor, ”says Eckhard. But when she got pregnant, she got no replacement. When she went to a branch again after moving to Hamburg, she had an unpleasant experience - and that was it. "Many employees in banks certainly do a great job, but you often have the feeling that they have to or should sell certain products - that's very old school," says Eckhard, describing her relationship with traditional financial institutions.

Great pressure on millennials because they lack the security of a pension

Instead, she prefers to educate herself on the capital market, listens to many English-language podcasts, speaks to friends and tries to get tips about promising companies through channels from her time in Los Angeles. An important insight that she gained: “I should have started investing much earlier. My younger brother already deals with it extensively, I sometimes have the feeling that I'm already running late, ”says Eckhard. The Fomo - Fear of missing out - is already big.

And that's not an isolated case either. Professor Hurrelmann: “Those under 30 are under much greater pressure than those over 50 to build up their wealth. They know that the pension security is no longer effective, that they do not have basic security like their parents - and that is new in our society and that irritates this generation. ”According to the current situation, representatives of Millennials and Gen Z would have to continue to retire have a full-time position - and even then it would not be certain whether the pension entitlement would not have completely melted by then, said Hurrelmann.

Hurrelmann and his team have written several studies. One that is regularly commissioned by the MetallRente pension fund is called “Youth, Provision, Finance”. Every three years, around 2,500 young adults between the ages of 17 and 27 are asked about their ideas for their personal future, their savings behavior, their financial knowledge as well as their attitudes and strategies for retirement provision.

They show that the generation of 17 to 27 year olds wants quite conventional financial products back: in addition to pension insurance and company pension schemes as two central pillars of security, there is also the desire for a state-secured concept that would allow money to be invested for provision , but also to be flexible in releasing savings again, should they be needed for wishes. In addition, this savings product should also display digitally how far you have come to your goal.

Sounds like the classic fixed-term or overnight money - if it weren't for the current negative interest rates that are also affecting these products, as well as ongoing inflation.

The last MetallRente study from 2019 also shows the generation's fear of old-age poverty: 85 percent of those surveyed expected to have to work well beyond their 67th birthday. 86 percent agreed with the statement that without independent provision, significantly more people will be affected by old-age poverty in the future. 68 percent feared being poor themselves in old age.

Stock trading via smartphone also has something to do with privileges

So grab your smartphone and secure your retirement provision by buying shares? Hurrelmann: “This phenomenon is still quite new and only appeared 4 to 5 years ago. The media coverage makes it seem like many are participating. In fact, according to our estimates, it is only 4 to 5 percent of this generation who buy and sell shares via smartphone. After all, we can see that the willingness to invest in the stock market is increasing and in some cases even higher than that of the older generation. ”Nevertheless, that would also have something to do with prosperity: Those who trade in stocks must be able to afford it.

A realization that blogger Eckhard is also very aware of. "I love to talk about money - and I would probably do it a lot more often if I didn't worry that I would exclude people." Her main concern is to motivate her mainly female followers, the first one To take a financial step - because that is always the hardest, as she knows from her own experience.

Eckhard would also welcome an earlier education in matters of finance in school - “although I don't know whether that would have really interested me at 15 or 16 as it is now. Fortunately, the topic is now very relevant. "

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