Millennials are on the cusp of becoming the wealthiest generation in history, with a staggering $90 trillion wealth transfer expected to take place over the next two decades. This transfer of assets from the silent generation and baby boomers to millennials will undoubtedly make them the “richest generation in history,” as estimated by global real estate consultancy Knight Frank.
Despite the massive wealth heading their way, concerns have been raised about whether millennials are truly prepared to handle this seismic flow of income. According to Salvatore Buscemi, co-founder and managing partner of multi-family office Brahmin Partners, millennials are “very ill-prepared” compared to the wealth-creating generation that came before them. With most millennials set to inherit this wealth in their 40s, questions arise about their ability to start businesses or invest wisely, given their lack of previous experience in these areas.
Experts suggest that millennials are more focused on short-term goals and immediate gratification, as opposed to long-term financial planning. Living through the global financial crisis of 2008 has shaped their mindset differently from previous generations who experienced events like World War II. This shift in perspective may impact their approach to saving, investing, and managing wealth.
Research by financial services company LendingClub reveals that millennials are more likely to live paycheck to paycheck, often having to support both aging parents and their own children simultaneously. This financial burden, coupled with the pressure of managing a large inheritance, can add to the challenges faced by millennials as they navigate their financial futures.
There is a significant difference between individuals who have earned their wealth and those who have inherited it. Clinical psychotherapist Paul Hokemeyer notes that those who have built their affluence from the ground up typically exhibit a strong sense of internal control and confidence in their financial abilities. In contrast, individuals who inherit their wealth may experience feelings of insecurity and doubt regarding their capacity to manage or rebuild that wealth in the future.
While millennials stand to inherit unprecedented levels of wealth in the coming years, there are valid concerns about their readiness to handle this financial windfall. As they navigate the complexities of managing inherited wealth, it will be crucial for millennials to develop the necessary skill sets, mindset, and financial literacy to ensure their long-term financial well-being. The wealth transfer presents a unique opportunity for millennials to redefine generational wealth management practices and establish a strong financial foundation for themselves and future generations.