Travel (37% versus 10%), education (31% versus 4%), a motor car (32% versus 11%) and starting our own business (23% versus 3%) are the top reasons why we millennials (young adults between the ages of 21 and 30) are more likely to save than older generations, according to the 2018 Old Mutual Millennial survey.
By Samke Mhlongo
Speaking at an intimate gathering recently, Managing Director of Old Mutual Unit Trusts Elize Botha, revealed the findings of the survey commissioned to better understand the financial behaviour of employed millennials.
The survey also shows we are better educated, more tech-savvy and optimistic than our parents were, making us more likely to seek financial independence and personal fulfillment.
“This shift in priorities speaks to the bigger differences in the way millennials and older generations view money and the unique challenges they face,” says Botha. “Complete financial freedom – and the flexibility it offers us to travel, or to be our own boss – comes when the income from your assets exceeds your expenses.”
And this could be the reason for the curious nature of millennial financial freedom, because whilst we are exercising the flexibility to travel and be our own boss – it is often on credit and not because we have built up the necessary assets and wealth.
Mapalo Makhu, Personal Finance Coach and founder of financial coaching firm, was also speaking at the same event, and explains why. “Many first-generation middle-class South African millennials are playing ‘asset catch up’ – purchasing appliances and motors vehicles on credit – while caring for financially dependent relatives (other than their children) which creates a tension between the expectations of family and the dreams millennials have for their own financial future”.
Asked during the research phase to define what financial freedom means to them, South Africa’s millennials described financial freedom as the state of not worrying about what something costs; travelling to wherever they want – whenever they want; and managing to live their life without asking others for money.
Interestingly, only one of the six respondents described financial freedom as living debt free. Could this indicate that as millennials we attach financial freedom more to lifestyle (regardless of how it is funded) than to being debt free and having our own assets? The four biggest pitfalls that stall financial freedom for millennials seem to suggest that.
According to Botha, high levels of debt (64% of millennials have a personal loan), saving rather than investing (47% of millennials do not know what a unit trust is), and not defining your values and financial goals are the biggest pitfalls millennials face on their journey to reaching financial freedom.
Makhu agrees, adding that unless millennials address these pitfalls, they’ll struggle to reach their financial goals. And whilst not everyone aspires to build financial wealth, becoming financially free is achievable for most people by applying simple principles in a disciplined approach”, she concludes.
It just may be that some millennials need to realise that being financially free is more sustainable than simply acting like it.
