Read time: 5 mins Money management

Millennials and money: spending, saving and investing

  • Millennials face bigger money challenges than their parents and grandparents
  • To make their financial ambitions a reality, they need to take action
  • Investing could be the answer, and we’re here to help

Millennials are getting a lot of flak, and it’s time to give them a break.

According to some stories you read in the media, they’re a selfie-obsessed generation who can only communicate via emoji and exist on avocados.

But branding an entire generation as entitled, unfocused and lazy is missing the mark.

In fact, millennials - those born between 1980 and 1996 – have a battle on their hands.

They are the first generation that will earn less than their parents, but they face far higher housing costs and an unpredictable jobs market, with many in part-time work or self-employed.

That can mean an uphill struggle to achieve a lifestyle like their parents and grandparents.

But for those who hold ambitions of owning their own home, for example, we can help them take action and investing could be the answer.

Sensible saving

Before you start investing, the first step for many will be to prioritise paying off any debts.

We don’t think they should make up any more than 15% of your outgoings, so perhaps see where you can cut back on your spending, set yourself a budget, stick to it and use the cash you have saved to get your debts under control.

We also recommend saving up a rainy-day fund so you have some ready money in case of an emergency - at least three months’ worth of outgoings is a good rule of thumb.

Once your short-term finances are secure, you can then start thinking about making your money work harder by investing for the longer term.

That rainy-day money is an important safety net because, once you have started investing, you should commit your money for at least five years to ride out any peaks and troughs in the stock market, so you don’t want to have to dip in to your investment pot during that time.

Intimidated by investing?

Many millennials, perhaps because they lived through the 2008 global financial crisis, appear to be skeptical about investing.

But a diversified investment portfolio, that includes stakes in things like property, government bonds and shares in companies around the world, can be an effective way to generate useful returns.

According to financial research company Lipper, the average Stocks and Shares ISA generated a return of 11.75% during 2017, for example. Though past performance is not an accurate indicator of what may happen in the future.

But before you start, it’s important to look at your lifestyle and see how you can strike a sensible balance between saving, investing and spending.

And my advice is to get advice.

By asking a few questions about your financial situation, investment experience and attitude to risk, a financial adviser can give you a recommendation as to how to achieve your goals.

That might mean not investing for now, but instead prioritising paying off any debts.

Photograph of a cup of coffee

The sooner, the better

An important consideration at this point is to avoid high fees, which can take a big chunk out of your cash over time – so bear that in mind when you are comparing investment platforms.

Then, by scheduling regular, affordable payments into a Stock & Shares ISA, Self-Invested Personal Pension or General Investment Account, you can then start enjoying the benefits of investing.

Each of these types of investments have their own advantages, which are worth talking through with an adviser to work out which one suits you best.

The one thing all our products have in common is that they are diversified – so you don’t put all your eggs in one basket.

In fact, you’d own stakes in hundreds of different companies in dozens of countries, helping you manage your overall investment risk and increase your chance of eventually buying that dream home.

Whatever your ambitions, don’t put off your preparations.