Millennials, this is the only way to deal with future monetary uncertainties

By Uma Shashikant

Last week, the hashtag #MillennialRetirementPlans was trending on Twitter. The tweets offered humour, pragmatism and a range of emotions. It was interesting to see the need to break away from norms of the earlier generations. The young were persistent in pointing out that what worked earlier won’t work now.

Maybe, maybe not. Should we be in charge of our retirement or let the government provide retirement benefits and social security? This debate is old, and we have lived through the cycles of one school dominating the other. The baby boomers (born 1946-64) broke away from handouts and expected their governments to only provide the framework for retirement security. The focus moved from benefit to contribution. People began to save early, invest without touching the corpus, and allowed it to grow and fund their retirement.

Generation X (born 1965-1980) stepped into their work lives during the period of boom and bust, making money or losing jobs into their adulthood. They were the consumerist generation. They got themselves into debt for homes and used credit cards happily, and lived with the confidence of finding a job to do through their lives. They worried when conversations turned to retirement, felt guilty about not doing enough, but hoped to begin to save sooner than later. They wished the government offered some social security.

The millennials (born 1981-96) are not sure what the long term holds. Many joke about not living long enough, or spending half their lives finding a job and the other half paying off loans. They disapprove of the conservative approach of baby boomers, though many of them think they may fall back on inheritance or their parents’ incomes if all else fails. The primary marker for the millennials are that they are not in the formal workforce by choice; they like the gig economy instead. Working wherever their skill is sought, or starting small businesses that may or may not work, is how their work life pans out. They increasingly don’t own homes and cars, for they find loans burdensome.

They blame the older generations for putting them through expensive but useless education and for advocating savings and owning assets, when their income itself isn’t stable.

What would an educated generation that works hard, but finds the amount of uncertainty they have to deal with is too high do? Retirement would be the last thing on their minds. The traditional answer to an uncertain future was savings. The baby boomers denied themselves the luxuries to save for the future. They saw the savings as their insurance against unexpected events.

The millennials do not have that world view. They do not divide their work lives into compartments. The idea that you would earn, save and retire seems not just staid, but difficult to pull off in their times. Their view of their finances revolves around the balance between spending and earning. Since they are currently struggling to get past this basic equation of comfort, their ability to have a long term view is limited. Many remain pessimistic about their future, their longevity, their retirement and their wealth.

The inequality in income rankles many who posted on Twitter. They find earlier generations have not only become very rich, but have also eliminated many traditional jobs that paid a steady income. They do not see themselves necessarily as entitled, but blame the earlier generation for the excesses and the lack of jobs across the spectrum. The gig economy, where every paying job is a risky contract, is not their making, they argue. They see it as a response to the excesses of the capitalist and consumerist economic models. The leaning of a significant number of millennials to somewhat socialistic models stems from their view that this inequality needs serious correction.

Health is a big concern, expressed in various ways in which it affects the millennials’ lives. They worry about the lack of ethical selling in the food industry; they see themselves as being afflicted by lifestyle diseases, as they keep long hours and eat erratically; they find themselves short of money and time to address any health issues that may arise; and they worry about falling ill and losing their jobs. The highest level of pessimism is about aging and being afflicted with some disease that needs money and prolonged care. They don’t see themselves prepared, nor do they see solutions.

The distaste for savings is to my mind the core problem. There isn’t any other easy solution to an uncertain future. Not the stringent saving that kills, or the erratic saving that is indisciplined, but a small and persistent saving as a habit. The modern times are not easy, and the millennials’ stories about uncertain jobs are real. How would you solve a problem you do not control?

It is the nature of economic cycles to not reveal the trends until we are well into it. The conservative baby boomers would not have imagined themselves on top of a wealth pile. If they did, they would not have been so frugal. Gen X would not have taken loans, spends and job changes with abandon, if they knew their jobs will get redundant. The confused milliennials do not know how their creative solutions to uncertainty, their determination to set the wrong right, will make a better world for everyone. While we argue for what we see as effects and consequences, we discount what we do in action to enable change.

That one ground rules remain unchallenged through this churn—the precious merit of our little savings that have been invested to protect us when in trouble. The millennials need not kill themselves to save; but holding back on one spend a day will go a long way. Put aside the cost of one meal a day, you will be surprised how it grows with time. Old fashioned, but immensely doable.

(The author is chairperson, Centre for Investment Education and Learning)