Are millennials irrational in money matters?
Here are some responses that may make you think so…
“We millennials are a selfie-obsessed generation. We don’t like to compromise on what makes us happy,” says Manish.
“We live for experiences and we don’t really care much about age-old tenets that advocate prudent and ideal behaviour all the time,” affirms Shikha.
“We express a lot more than our previous generations did. And we love to impress the world with what we express,” agrees Gaurav.
But what they don’t say explicitly is, “Yes we are more jugaadu than you but we learn quickly from our mistakes. For us money matters a lot but only to spend on things we like. We don’t believe in leaving behind legacies for our future generations.”
Jugaad is an old famous Hindi colloquial word. If you are doing a jugaad, you are trying to find a quick but temporary solution to an issue at hand.
Here’s the classic story of typical millennials, Varun and Arpita, who managed to do a jugaad of Rs 5 lakh.
For the last two weeks, Varun and Arpita were struggling to arrange Rs 5 lakh to finance their trip to Italy.
They were planning to do a pre-wedding photo shoot in Italy.
Sounds too extravagant, right?
But for them, it’s a memory that they will cherish forever.
Not that they are born with a silver spoon in their mouth, but their aspirations are high.
Here’s the jugaad…
Arpita took a gold loan from a Non-Banking Finance Company (NBFC) at 10% interest. She had no qualms in pledging gold jewellery because she felt gold was just an asset that she could pledge for money any time she needed it.
Her family wasn’t happy about this.
Nonetheless, she managed to convince her granny—who gifted her gold jewellery—before taking this decision—a jugaad of another kind.
What’s more, Varun sourced a loan against his future salaries from a Peer-to-Peer (P2P) lending platform at 18% interest.
Their families thought Varun and Arpita were living beyond their means.
So, do millennials lack financial discipline?
Thankfully, many millennials understand the importance of financial discipline. Unlike the previous generations, millennials aren’t shy of discussing their incomes with their advisors. They don’t mind seeking professional help in planning their finances.
When it comes to borrowing money, not all millennials are reckless.
Let’s go back to our example of Arpita and Varun.
What would you say if we added other typical millennial traits to their story?
Suppose we tell you that they realise that borrowing becomes a habit before one knows it and believe that one shouldn’t shell out more than 30%-40% of one’s monthly income on paying all EMIs clubbed together.
But that rule doesn’t stop them from borrowing for a foreign trip.
Would you also be surprised if we add that Varun and Aprita want to get married in a low-key ceremony—so that they can save for a honeymoon?
Let’s add to this their resolve to take up fresh loans, post-marriage, only when they repay the older ones completely.
In fact, the cherry on the millennials money approach would be that Varun is saving to buy his first car in the next 5 years. He has done some basic math to find out how much a car that costs Rs 8 lakh today would cost him after 5 years.
To get there, he is investing Rs 12,000 in a Systematic Investment Plan (SIP) of a mutual fund scheme hoping to earn 12% compounded annualised returns.
So if you look at their case through unbiased lenses, they too are not really financially reckless.
The trip to Italy may have been a spontaneous decision but otherwise, Varun and Arpita don’t splurge.
“We millennials recognise the importance of financial planning but we don’t want to go overboard with it. We don’t disregard the wisdom of our previous generations,” explains Shraddha.
The financial planning needs of millennials are different from those of their previous generations. For example, if you are a millennial, you are likely to lease assets as services more often, than creating your own. Millennials start working late, because they pursue higher studies, but, they aspire to retire early. Their retirement planning needs are strikingly different as well.
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