Millennials keen on financial freedom, increasing their net worth

Millennials are more likely to seek financial independence and personal fulfilment than older generations.

A Millennial survey by Old Mutual showed that 24% of this group – born after 1980 to early 2000s – are currently invested in a unit trust (versus only 2% among older generations) with 57% of them saying they invested in a unit trust with the purpose of increasing their net worth, and 47% saying they looked to invest to reach financial freedom.

The survey also revealed that 35% of millennials were saving money to pay back debt (this number was 13% for older South Africans).

When it comes to savings priorities, the research also showed that millennials are more likely to save – in order of priority – towards travel (37% versus 10%); education (31% versus 4%); a car (32% versus 11%); or starting a business (23% versus 3%).

Elize Botha, managing director of unit urusts at Old Mutual, explains the four pitfalls millennials face on their journey to financial freedom:

High levels of debt

Debt, typically in the form of personal loans, is often used to buy things that will be consumed, such as appliances, clothes, or items that tend to depreciate over time.

The survey revealed that 64% of millennials had a personal loan and that 35% of their income was spent on servicing the interest on debt (compared to 14% and 13% among older generations respectively);

Saving, rather than investing

According to the research, an alarming 47% of millennials – nearly half – did not know what a unit trust is.

And almost 61% were saving money in a bank account, suggesting they don’t understand the difference between saving and investing, or that their savings priorities are very short-term in nature;

Keeping up with the Kardashians

Another pitfall is overspending – often using expensive credit – to buy the things we absolutely “need” to appear successful.

“Constantly increasing your credit limit as your income increases to keep up with the expectations of friends and family, only serves to keep you further away from reaching your goal,” she says; and

Not defining their values

“Without a clear goal, most people will find themselves spending rather than saving. Every person is unique, and our relationship with money is often complex. An understanding of your intrinsic values is also essential to find the resolve to achieve financial freedom.”

While investing enough money to be financially free may feel like a long shot, Botha advises millennials not to be intimidated and to start small.

“Once they have achieved a milestone, they will be more motivated to reach the next, and bigger goals won’t seem so unattainable. Start today.”