A 6-PART FINANCIAL WELLNESS SERIES
Traveling is as much about the ability to pursue dreams as it is about boarding passes and bucket lists. At Griots Republic, we understand that building a secure financial base is only one aspect of ensuring that we reach those dreams. Stay tuned and please leave comments or questions for our 6 part financial wellness series.
A younger friend of mine and I were conversing about money the other day and he said to me “I’m not trying to leave anything behind for my kids or my family. I am going to spend all of the money I make while I am here on Earth so I can enjoy it.” “They are going to have to work hard and struggle just like I did”. This was shocking to me. Now, I am about 8 years older than him. Generationally we are separate. I was born in 1977 so I am considered a member of Generation X (people born roughly between 1960-1980) and he was born in 1985 so he is considered a Millennial or a member of Generation Y (1980 – 2001). I am married with a 17-year-old son and he is single with no kids. Our outlook on the future varies and our conversation really reflected and exposed how differently we look at things today like family, work, marriage, children, and legacy.
In this Building Fund series, I have covered a wide range of topics centered around financial wellness. One of the key components of wealth building is in fact: Inheritance. Defined as something passed down from your parents or family members, this can be in the form of cash, college tuition, a life insurance benefit, real estate, investments, stocks, bonds, or personal property from an estate or trust. The people we consider “rich” did not all become this way through hard work alone. Many had a hand up and or a windfall from a previous generation. Especially when we try to understand the Racial Wealth Gap in the United States. According to a new study by Brandies University, a powerful factor seems to be that whites are five times as likely as blacks to receive substantial gifts and inheritances, and the sums they get tend to be much larger. The money “can be used to jump-start further wealth accumulation, for example, by enabling white families to buy homes and begin acquiring equity earlier in their lives.”
When we were growing up our parents (Baby Boomers, people born roughly between 1942-1960 also referred to as the post-World War II baby boom) taught us to go to school (many Gen Xers are the first in their family to go to college), work hard, get a good job, get married, raise children and leave behind a legacy. This was their life’s model. In a study for MetLife by my alma mater – Boston College’s Center for Retirement Research, it estimates that two-thirds of the Baby Boomer generation’s “households will receive some inheritance over their lifetimes, with a median amount of $64,000….an average of $1.5 million for those in the top wealth decile compared with $27,000 for those in the bottom decile.” Now, at one time, Boomers were expected to benefit from a wealth transfer of up to $41 trillion from previous generations. Then reality happened; incomes stagnated, inflation/cost of living raised, people lost their jobs, and medical care costs for the elderly increased. More recent estimates put the boomer inheritance at $11.6 trillion. This may sound like a lot, however, the firm Accenture estimates that $30 trillion will pass from boomers to Millennials over the next 30 years (almost 3 times as much), giving financial firms plenty of incentive to court the kids and figure out how to gain them as future customers.
For many youth, their home life has changed in recent years. Often times without both parents due to a 50% divorce rate, higher incarceration and other factors these children will witness economic struggle firsthand. It makes their vision very shortsighted and they tend to not look too far into the future. Millennials are VERY aware of the world around them. Thanks to technology, they process more information than we did. They saw planes crash into the World Trade Center. This has made them weary and financially conservative. “Growing up, millennials have witnessed many boom and bust cycles – the dot-com bubble burst, mortgage crisis, two stock market crashes,” Alex Pigliucci, Global Managing Director of Accenture Wealth and Asset Management Services. Millennials are not prioritizing retirement, children and/or legacy. According to a new Merrill Edge report, the “me first” generation is outperforming previous generations in saving but with seriously different goals in mind. “Millennials are the first generation to plan long-term for financial freedom instead of retirement,” says the report. Sixty-three percent (63%) of millennials are saving to live their “desired lifestyle,” as opposed to forty-five (45%) percent of both baby boomers and Gen Xers. (READ: Avocado Toast). As Aron Levine, head of Merrill Edge, puts it, “Young adults tell us they are willing to do whatever it takes to achieve freedom and flexibility, even if it means working for the rest of their lives.” (Ever heard of Tiny Homes?)
Now I don’t know about you but retirement is the #1 thing on my mind and it is evident. For most of my 18-year career in IT, I have worked 9 to 5 in an office or cubicle, inside of a brick and mortar building. But it’s the Millennials in the workforce that are driving mobility initiatives (remote, work from home) or from anywhere in the world. On a beach in the Caribbean or South America, in a café in Europe or Asia or on safari in Africa. They are also changing the definition of dress code, flexible work hours, & maternity/paternity leave. They want to bring their pets to work. They will sleep, workout, shower and eat at the job, and get their dry cleaning done there while they are at it. As long as they have an internet connection, a web browser or an app they feel fine. Apparently, the future is now.
But what will they leave behind?
Despite entering the workforce at the start of the last recession (2006-2012), millennials as investors, still have a reputation as an entitled generation. The key question revolves around how this plays into their expectations around money, as well as how much they may inherit. Let’s be honest. If you expected over a $1 million inheritance, would you bother to try as hard? I doubt it. Many of us, especially the children of immigrants like me knew that our parents weren’t rich so it made us determined to make it on our own.
What kind of inheritance do you expect to receive if any? What will you do with it? Will you spend it? Invest it? Are you going to leave behind a legacy? Or party like a rock star and take lavish vacations until you drop? What if I told you that with proper financial planning you could do both? Do you have a financial advisor yet? If not you can find more information on how to obtain one HERE.
If you have any uncertainty now might be a good time for you to discuss finances, estate planning, life insurance and inheritance with your children, parents and/or grandparents. Clarity is essential. A fairly fundamental family value is not equally shared, which likely means it isn’t being discussed. It is also likely that someone—or everyone—is making assumptions. And we all know what happens when you assume.