The Rise of Millennial Wealth: A Kiwi Perspective

Contrary to common belief, millennials in New Zealand are wealthier when compared to their predecessors at the same age. Amid the concerns surrounding escalating real estate values, millennials are seizing the opportunity to invest tens of thousands of dollars in stocks (shares) and education, surpassing the practices of preceding generations. A Bloomberg report showed the average finances of today's 26 to 39-year-olds are better overall than the previous generations, which likely correlates with New Zealand data.

How Did This Happen? Here Are Three Reasons: A New World, Education, and Investments

1. The World Has Changed

Millennials journey through early adulthood has been rife with the trials posed by dual recessions, skyrocketing housing costs – despite recent pullbacks, and the burden of significant student debt. These challenges have delayed conventional life milestones like marriage and homeownership, especially as Millennials approach their fourth decade. This apparent delay can be an unexpected boon. Millennials are embracing smaller family sizes, initiating early investments that harness the power of compound interest, and channelling their energies into their careers. These prudent choices catalyse a ripple effect that propels wealth accumulation.

Throughout history, each generation has typically enjoyed more financial prosperity than the one before. If millennials appear to be struggling, it could signal the end of a long trend of multi-generational economic growth. However, comparing generations is complex, mainly because the markers of success evolve with changing times, and we adapt our strategies for success accordingly.

As with any economic analysis, comparing generations is a complex exercise since benchmarks of success evolve with time. While millennials are grappling with soaring housing prices and rents, these are challenges faced by all New Zealanders.

2. Education

The New Zealand training and education landscape has shifted since the era of the baby boomers. Before, you could finish high school and get a decent job. In 1960, there were only 16,000 students enrolled at university or 0.7% of the population. This reflected our country then: plenty of manufacturing and farming jobs. Nowadays, manufacturing has moved offshore, farms and agricultural work is more automated, and there are a lot more service jobs instead.

Today, school leavers ensure financial stability with a university education or with a trade. That has seen university numbers soar to some 200,000 students a year, or 3% of the population.

This has resulted in a surge in student debt, a burden Millennials willingly shoulder. Compared to their parents who often enjoyed free higher education, or no need for it at all, New Zealand's Millennials often bear tens of thousands of dollars in debt. Higher-paid roles require advanced education, and these interest-free student loans might be seen as investments in future earnings. Now more than ever, the importance of education around AI, machine learning, advanced robotics, and other high-tech topics could provide a great basis for a future career. Unfortunately for older generations, the lack of education around AI and tech may mean that they need to catch up, which is where millennials will no doubt be able to step into more senior roles and be rewarded with higher incomes.

To add some balance to this, traditional schooling and university education is being disrupted at a rapid pace. Micro-courses and globally accessible training platforms can teach advanced skills to nearly anyone, wherever there’s an internet connection. Millennials are latching onto this faster than most age brackets, but anyone with the will and skill to adapt to these new training methods will probably be the best postured for the future.

3. Millennials Invest

Millennials are the first generation to grow up with internet access. They’re familiar with the information superhighway, which has helped them be more financially savvy around investments. Compare this with older generations, who needed a book, university, or subscriptions to hard-copy magazines or newspapers to learn about investments or even track the stock market!

Millennials were early adopters of KiwiSaver, and in more recent times, with online share trading platforms that became so popular during the lockdown years.

4. Wealth Transfer (Bonus Section)

Based on what we regularly see, we added this point to Bloomberg’s list.

The greatest wealth transfer in history – from Baby Boomers to younger generations – has begun. Millennials are often the children of Baby Boomers, which means they are already starting to inherit vast wealth the Baby Boomers have accumulated. We see signs of this already, with parents and grandparents partly funding their children and grandchildren into houses.

Overall, this massive wealth transfer will enormously impact investment trends, the financial sector, and the global economy in the decades ahead.

Impacts of this will include:

• Those who inherit, Millennials and other generations who are the beneficiaries of the wealth transfer, may be far bigger risk takers than their parents.
• These beneficiaries may be willing to take risks before receiving their inheritances because they know they have a safety backdrop.
• They may be more willing to freelance or start new companies rather than following more conventional career paths.
• Younger generations are often adopting a more ethical approach towards investing, particularly as far as climate change is concerned.

This list could go on and on as the massive wealth transfers in the years ahead will create many opportunities – and challenges – for businesses, individuals, and even governments.

Related material:

• ‍‍Financial warning signs in a relationship
• Prenuptial agreements: safeguarding love and assets
• Millennials are about to be the wealthiest generation in history
• The approaching wealth transfer to women

It’s Not All Good News for Millennials

As many readers are probably thinking, homeownership levels in New Zealand paint a sobering picture for New Zealand Millennials. In 1991, 61 percent of people aged 25 to 29 lived in an owner-occupied home. By 2018, this had dropped to 44 percent. However, this trend also reflects rational choice. Higher wages and better skills development are now found in large urban areas with expensive houses. If homeownership feels elusive, it often stems from pursuing careers in thriving urban centres such as Auckland and Christchurch.

But it also reflects changing needs. Millennials today are the most transient generation the world has ever seen. Many now see homeownership (and a mortgage) as a life sentence. The mortgage payments need to be made each fortnight or month, and with interest rates recently experiencing their steepest climb ever, it may seem to people that a house is a liability rather than an asset. Instead of homeownership, an investment property might be a better fit for you.

More and more people prefer flexibility, financial and personal freedom, with the ability to travel and possibly even perform work online from anywhere with an internet connection.

The Bottom Line: Millennials Are the Wealthy Generation

Despite the headlines, data overseas show the Millennial generation is wealthier than those before it at the same age, and we think the data would likely be similar in New Zealand.

Millennials have access to platforms where they can invest their money that previous generations could only dream of, and education and technology to get their earnings sorted too. As the economy continues to transform, Millennials are the best positioned to make the most of the opportunities that will present.