Statistics from Deloitte’s latest annual Global Millennial Survey reveals that 71% of South African millennials (those who have reached young adulthood in the early 21st century) expect to be better off than their parents when it comes to their finances. Due to this generation having a different mind-set compared to other generations, they need a different type of lifestyle financial planning.
According to Nico Coetzee, Executive: PPS Financial Planning, millennials can be characterised as eternal optimists, open-minded and social centric individuals who have nuanced needs when it comes to financial planning.
Millennials, more than any other generation, value the ability to manage their own finances by using technology, especially from their mobile devices, he says. “In addition, they are open to financial offerings from non-financial brands and they are very likely to visit a financial services company’s social platforms for relevant content and advice. This generation is also very hungry for educational information and influential content, such as customer reviews, expert commentary, thought leadership and product or service information.”
It is important for millennials to understand the value of the new generation of financial planners, known as ‘lifestyle financial planners’, says Coetzee. “Financial planning has evolved over the years and these lifestyle financial planners are not in the business to sell products, but rather look at how they can develop simplified and relevant financial plans,” he explains.
Coetzee explains that lifestyle financial planning is made up of a number of small decisions, as opposed to one big decision. “A lifestyle financial planner will be able to guide the individual on how to implement these small decisions in their life to achieve their overall financial goals.”
Below Coetzee provides some real-life examples of financial mistakes that young people can easily make during their different life stages;
Example 1: When the millennial gets their first job around the age of 25 they face the decision of whether or not to purchase income protection, but they chose to rather spend the money that could go towards income protection premiums to buy fast food take-aways. However, what they fail to realise is that this poor decision can result in massive financial losses due to not having income protection should they become injured or disabled and are unable to perform their job.
Example 2: Millennials also face the issue of whether to start saving for retirement at age 25 or postpone this savings until the age of 30. If they choose to rather spend a typical monthly contribution to a retirement fund on entertainment, like movies or dinners, this five year procrastination could lead to a significantly low retirement savings pot as they will not benefit from the compound interest.
Example 3: Millennials may also decide to invest in the stock market and will then be faced with the option of obtaining help from a financial planner, obtaining advice from friends or using stand-alone robo-advice or online platforms to buy shares. While it may seem easy to invest, this over-reliance on friends and technology can lead to severe financial losses if they don’t obtain proper financial advice.
“Millennials need a lifestyle financial planner who will listen to their concerns, goals and dreams to determine what their lifestyle requirements are and compare these against their current financial situation and obtain the solutions that they actually need,” concludes Coetzee.