Stuart Gentle Publisher at Onrec

Millennials out-invest Gen X and Baby Boomers

Familiarity with technology and a desire for higher returns is driving a preference for online investment platforms among younger generations

Millennials aged 18-34 are out-investing Gen X (those aged 35-54) and Baby Boomers (aged over 55) according to a new study by ArchOver, the peer-to-peer (P2P) business lending platform. The report, Next Gen: Investors and Savers, explores the UK’s attitude towards risk and investment in the current climate. The research of 2,000 UK adults revealed that two-thirds (67%) see themselves as savers, using deceptively ‘safe’ banking options like savings accounts and pension funds to sit on their cash. The remaining third (33%) see themselves as investors, using riskier avenues like stocks, shares and property to grow their investments.

However, in a challenging economic environment, there are signs both savers and investors need to broaden their options and embrace alternative forms of finance to secure higher yields. The Millennial generation is often portrayed as less financially savvy than the generations who preceded them. The common view of this generation is that they lack the foresight to build up a portfolio of savings, investments and pensions and are being driven out of the housing market. Yet this is also a group that is confident in their own financial abilities and acutely aware of the need to make their money work harder. Of the 2,000 people surveyed, 35% of Millennials are investing or saving more than £250 per month compared to 26% of Gen X and 25% of Baby Boomers.

“Despite claims that Millennials are stuck in a financial rut, trapped by high property prices and low-wage growth, this is a generation that has grown up in an era of record-low interest rates and recognise the need to secure better returns on their disposable income,” explained Angus Dent, CEO of ArchOver. “On the other hand, those aged over 35 are at risk of missing out on new avenues offering higher returns. Gen X and Baby Boomers could benefit from following in the footsteps of Millennials and introducing greater diversity into their investment portfolios to seek out higher returns.”

Millennials, who have been early adopters of social media and have a strong familiarity with technology, are using this knowledge to identify new online tools or platforms to invest over. The research reveals that 59% of Millennials trust technology and use automated services to help generate the best financial decisions. In contrast, just 40% of Gen X and 24% of Baby Boomers claim the same. As a generation of digital natives who are strongly connected online with access to a wide circle of information, Millennials are relying on reference points from their peers. Overall, 41% of 18-35-year-olds get investment advice from their friends, family or colleagues, while older generations are more hesitant to talk about money. Only 31% of Gen X and 19% of those over 55-years-old would turn to their friends or family for advice.

Those aged over 35-years-old are also failing to take advantage of opportunities to diversify their portfolios and experiment with options offering higher returns. Nearly half (44%) of Millennials are investing using P2P and 57% are comfortable with alternative forms of investment that hold a higher level of risk. In comparison, just 16% of Gen X are investing using P2P platforms and only 29% are considering new or alternative investments with higher risk levels. For Baby Boomers, these figures sink even lower. Only 8% have invested over P2P platforms and just 14% would accept the higher level of risk that comes with new and alternative investments.

“Rather than admonishing Millennials for being irresponsible, the older generations could learn something from following the behaviour of a new generation,” concluded Angus Dent. “Millennials, who grew up during the deepest and longest recession in recent history are proactively looking for ways to balance security and risk in order to maximise returns but without putting their capital in too much danger. In an effort to secure higher yields, they are tackling the difficult financial climate head-on.”

We have entered a new age of investment. Millennials are leading the way in using their digital know-how to experiment with ways of growing their nest-egg and setting the pace. Now it’s up to Gen X and the Baby Boomers to decide if they want to follow their lead.

The research reveals that Millennials see opportunity where older generations see caution. Over half (52%) associate the words ‘risk’ and investment’ with opportunity, while 55% of Gen X associate it with ‘discomfort’ and 58% of Baby Boomers associate it with ‘uncertainty’. Gen X are too preoccupied with safety to take a new opportunity that could grow their money - 60% would only invest in traditional and proven investments, such as bonds, cash, equity and shares that have benefitted them in the past. While over three quarters (76%) of Baby Boomers make investment decisions based on the security provisions in place to protect their investments. However, investment habits need not be generational. If investors can find a comfortable balance between reward and risk then a bolder, more creative and diversified approach can pay dividends.