The Generational Wealth Gap
In this blog post, we will talk about a growing problem that few are aware of: the generational wealth gap between millennials and their parents, and how the current generation is trying to close that financial gap. This post includes content from the Nova Money Mindset podcast where the guest is Martin Quinn, a public relations specialist and a father concerned about the future of his kids.
People in their thirties now are the only generation who have less household income. Then proceeding generations, and this goes back to the 1930s. Research by a company called Beanstalk found that if a child is born today and you put £25 a month into a Junior ISA account. In 18 years time, assuming a 5% growth would be worth £9,000 pounds. That’s the magic of compounding. Furthermore, if you try to explain to a 20 year old or a 22 year old why a pension is important, they’re going to just gloss over that they can’t fathom 40 or 50 years time. Martin thinks people will naturally be much more focused on solving their current problems than their retirement problem for a very old self that they don’t even know.
Some employees just decide to opt-out from the pension, which Martin found surprising because companies also have to contribute to their employee’s pensions. And if they opt out from their part, so do companies. And even though explaining and making, making sure that they 100% understand the impact of opting out from their pension contract.
They’ve still actively decided to opt out. Why? Because they need the cash now.
Our generation is financially squeezed. Less than 6% of the wealth is owned by millennials. The wealth gap we never talk about. Martin suggests technology can help us. Challenger brands don’t have the legacy infrastructure programs like the high street branches have, this allows them to come up with innovative solutions. This has also caused an increase in interest in cryptocurrency among GenZs due to quick returns. The financial service industry is going against the space due to high volatility. Young people need to understand the risks and the potential to lose everything.
To learn more about the generational wealth gap, check out the latest episode here!