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How Millennials Manage Money Differently From Their Parents

Investments, Personal Finance

Written by:

Alvin Chow

The millennial generation is in their prime now, ranging from 25 years old to 40 years old.

They make up 33% (744,600) of the Singapore’s labour force according to the Ministry of Manpower statistics in 2020. This makes them significant contributors to the economy and their earning powers have also increased.

This means that millennials have built up some wealth and there’s an increasing need to manage it.

Millennials approach money differently from their parent’s generation. Even the way that they built their wealth differed. This is normal because the influence, culture, opportunities, and wealth management options have changed over time.

Let us examine some of these differences.

Millennials made their wealth on the internet while their parents made it through brick-and-mortar businesses

The internet has boomed since the early 2000s and millennials were at the forefront of this development.

Entrepreneurial millennials have built businesses online and accumulated wealth in the process. This is considered pretty rare in the past, but the opportunities presented by the internet are real and millennials who took the risk and uncertainty to jump at it have profited immensely thus far.

In contrast, their entrepreneurial parents tend to start business in traditional industries such as F&B, distribution and construction. But they were not all entrepreneurs. Those who pursued careers had many lucrative job opportunities during Singapore’s booming years and some would have risen to management positions and built their wealth through the good remuneration.

Millennials invest online while their parents prefer real estate

The biggest investment opportunity their parents had was in Singapore real estate. The success of Singapore’s economy brought along a booming property market and generated wealth for their parents.

According to PropertyGuru’s survey, more Singaporeans feel that properties are highly priced and affect affordability in recent years. Higher entry prices also indicate lower potential return for property investment.

When one door closes, another opens. The number of investment options have expanded and millennials now have the opportunity to invest in a new class of disruptive tech companies or alternative investments such as cryptocurrencies. Such investment options were previously unavailable in their parents’ generation.

Moreover, some of these investments have made extreme moves in the past few years and there were stories of millennial investors making 6- to 7-figures from investments. These are outlier cases though as the individuals have taken big risks to achieve such extreme results. There could be investors who suffered heavy losses but remained unknown to others.

The more prudent way is to do long-term investing. That said, the idea of long-term investing has also changed. The previous generation may think of long-term investing as buying a basket of blue-chip stocks and hold them for years while collecting regular dividends. Millennials are exposed to digital solutions and would see index investing via Roboadvisors as an approach to long-term investing.

As such, wealth solutions have to be digitally delivered and meet the expectations of millennials to attract them to use it. Financial institutions are rethinking their approach to wealth management for millennials. One example is DBS, as the bank has made several improvements to their Wealth Management Account (WMA) to stay relevant to the younger generation. Let us look at some of their latest features and solutions.

DBS Wealth Management Account integrates various investment options all in one account

We have talked about the expansion in investment options for the millennials and DBS Wealth Management Account (investment account) recognizes this.

The equity investment functions are found in the digibank app

With the Wealth Management Account (Investment Account) inside your digibank app, you would be able to invest and bank within the app. This means that with just one login to digibank, you can buy or sell a stock and make a bank transfer from your savings account without having to toggle to another app.

This is not a norm as many institutions have yet to integrate their offerings and users often need more than one account and app to make investments in different instruments. Busy millennials value such convenience.

Wealth Management Account enables users to place equity trades on the same banking app.

Investors who prefer to invest in unit trusts can access over 150 funds via the digibank app. DBS has made it easier for investors with their list of recommended funds as well as showcasing the top performing and top purchased funds.

There’s a Roboadvisor in digibank which millennials would fancy. The DBS digiPortfolio offers 4 options:

  • Global Portfolio (Funds): 4-6 unit trusts
  • Global Plus Portfolio: 8-10 unit trusts
  • Asia Portfolio:SG-listed ETFs focused on diversified Asian exposure
  • Global Portfolio (ETFs): UK-listed ETFs with global exposure

DBS Treasures clients have access to all 4 digiportfolios options.

Millennials prefer to learn about money online while their parents believe it is a taboo subject

The previous generation believe money is a personal matter and a subject not to be discussed openly. They prefer to have a knowledgeable and trustworthy person to advise them on wealth matters.

It must be a shock to them that millennials are willing to share their money matters online and even trust advice by strangers! Millennials see it differently as they could gather more diverse viewpoints online before deciding what they want to do with their money. They prefer to use information to arrive to their own conclusions instead of taking advice blindly.

DBS Treasures understands this mindset and their Chief Investment Office (CIO) has been sharing regular insights on the digibank app for clients to consume the information conveniently.

Investors can take reference from the CIO’s outlook and DBS research team’s equity and economics reports to help them make decisions and reduce their investment research efforts.

Instead of having to select from over 150 funds, investors can shortcut the process by referencing the DBS Focus Funds – which are funds curated based on DBS CIO’s outlook.

We can see DBS’s efforts in providing and making information accessible on the digibank app and clients do not need to meet an expert should they choose not to.

But if more help is needed, DBS Treasures has a DBS TeleAdvisory service where clients can schedule a virtual consult meeting.

This is especially useful for clients who do not have the time to figure things out in the financial markets. They can choose to speak with a relationship manager to help them decide on their wealth allocation. The advantage goes beyond the expertise and advice they receive. They also get access to more products such as structured notes, bonds and hedge funds. DBS has a team of experts (alongside a relationship manager) that would be able to give holistic advice that include other financial needs such as insurance, legacy planning, and more.

Clients have the choice to decide how much assistance they need across the digital-physical continuum.

Millennials value convenience while their parents are more cost conscious

The older generations may never understand why millennials generally prefer to order food delivery when there are eateries within walking distance. Millennials might look a little wasteful in this aspect, but they are not! They simply value time more than the money spent.

Millennials have the tendency to pay for convenience to save time while their parents may prefer the cheaper option.

Similarly for wealth management, millennials demand fast and accurate tracking of their money whereabouts, as well as alerts to keep them updated. They won’t use the service if it is too much of a hassle. They prefer not to jump through hoops of administrative processes.

There’s an advantage in being the largest bank in Singapore; DBS has every wealth solution anyone needs and that makes holistic wealth tracking easy. Gone are the days of manual inputs of assets into a spreadsheet. The Wealth Management Account on the digibank app does that automatically.

Clients can also receive forex and equity alerts on the app. Unlike their parents, millennials tend to invest globally, particularly in the US stock markets. For example, if they hold USD exposure, the digibank app will alert them when the USD/SGD rates are favourable to do a currency conversion.

The digibank app has equity alerts too, clients will be alerted when there are price movements for stocks in their portfolio which saves them time as they do not need to watch the markets constantly.

Welcome to the New Era of Wealth Management

The millennial generation’s wealth has grown significantly, and it needs to be managed. But it has to be done differently from the previous generation because millennials prefer digital experience and convenient solutions.

DBS has redesigned their digibank app and has been improving it continuously to increase it’s appeal to the millennials. I must say they have gotten many things right.

If the above appeals to you, you can enjoy all the features and solutions without additional costs. You just need to be a DBS Treasures client and open a Wealth Management Account.

To qualify, you need to be an accredited investor and invest minimally S$350,000.

Check it out here.

This article is sponsored by DBS but the opinions belong to the author.

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