As estimates show, millennials are on track to become the wealthiest generation in history, with a projected $90 trillion wealth transfer over the next two decades. However, the question arises: are millennials prepared to handle the significant influx of money? Despite being set to inherit astounding wealth from the silent generation and baby boomers, concerns about millennials’ financial readiness have been raised.
According to Salvatore Buscemi, co-founder and managing partner of multi-family office Brahmin Partners, millennials may lack the necessary skills and preparation to effectively manage the wealth they are set to inherit. He pointed out that by the time millennials receive this wealth, they might be in their 40s and potentially unprepared to start businesses or make sound investment decisions. The concern lies in whether millennials will be motivated to acquire the essential skill sets later in life.
Experts suggest that millennials tend to focus more on short-term objectives, such as immediate gratification and experiences, compared to the older generations who prioritize saving for significant milestones like family-building and retirement. The financial crisis of 2008 may have influenced millennials’ perspectives on money, but they are said to be further removed from the economic hardships faced by their parents, who were shaped by experiences like World War II.
Research by financial services company LendingClub has indicated that millennials are more likely to live paycheck to paycheck compared to other generations, as they are often part of the “sandwich generation,” providing financial support both to their aging parents and their own children. This dual responsibility can strain their financial stability and ability to save for the future.
There is a distinction between individuals who accumulate wealth through their own efforts and those who inherit it. Clinical psychotherapist Paul Hokemeyer highlights that self-made wealthy individuals tend to have a strong internal locus of control, feeling confident in their skills and ability to rebuild their wealth if necessary. On the other hand, those who inherit wealth may feel more insecure, lacking the same level of self-assurance and adaptability.
Given the impending wealth transfer to millennials, it is essential to equip them with the necessary financial literacy and skills to manage their newfound riches responsibly. Strategies such as financial education, goal-setting, and long-term planning can help millennials navigate the complexities of substantial wealth and avoid common pitfalls associated with sudden affluence.
While millennials are on the cusp of becoming the wealthiest generation in history, there are valid concerns regarding their readiness to handle such a large inflow of money. By addressing these challenges through proactive measures and empowering millennials with the tools for financial success, they can effectively manage their newfound wealth and secure a stable financial future for themselves and future generations.