Younger people often generate their money themselves, rather than inherit it, finds a new report, and as a result, younger, more entrepreneurial generations, take a more 'hands-on’ approach to their wealth management compared to older generations.
Investors under the age of 35 are much more likely to take a ‘hands-on’ approach to their wealth compared to older generations, according to a survey of over 1,000 UK savers and 500 High Net Worth Individuals commissioned by Rathbone Investment Management.
Just over three-quarters of investors aged between 18 and 34 have taken steps to protect or safeguard their savings as a result of recent economic uncertainty; in comparison, just 36 per cent of investors aged over 45 had done the same.
Rathbone suggested that rising inflation, historically low-interest rates, and the ongoing Brexit negotiations have contributed to an atmosphere of heightened economic uncertainty in the past year.
But it says that the research shows some striking differences in how the different generations are navigating these choppy waters, with one in in five 18-34 year olds having diversified their portfolio amidst uncertainty, and a similar number (22 per cent) having personally reviewed their portfolio. Comparatively, the older generations are much less likely to have taken any steps to safeguard their wealth: one in ten have diversified their portfolio in the past year, and just 9 per cent have personally reviewed their finances.
Rathone theorizes that part of the reason for younger generations being more involved in their own finances may be because a higher proportion have generated their money themselves, rather than inheriting it from previous generations. According to the research, 18 per cent of 18-34 year olds had made their money through owning and running – or subsequently selling – a business. This is over double the over 45s, with just 7 per cent saying this was the case. Another potential factor for the younger generations being more actively involved in their approach is that they have grown up in very different economic times.
Rathbone’s research also revealed that younger generations were much more likely to use their money for good than older generations. One in five of 18-34 year olds believe social impacting investing is one of the best ways to use your money for good, compared to just 8% of over 45s.
Robert Szechenyi, Investment Director at Rathbones, said: “Younger generations – particularly millennials – have grown up during times of prolonged economic uncertainty, so it’s perhaps unsurprising that they are taking a hands-on approach to their finances. This strongly contrasts with that of older generations, who are by most accounts taking a much more passive approach to the current politically and economically volatile climate.
“Typically, it’s assumed that younger generations are less financially astute, but our research suggests the opposite. The start-up boom and rise of entrepreneurship in the UK means that younger generations are now much more clued up on their investments, and how best to protect and grow them.
“Higher inflation and the current economic uncertainty over Brexit mean that investors should be taking steps to ensure their portfolio can weather any storm as well as possible. A large part of this will be making sure that portfolios are well diversified.”