14 Mar

Wake Up, Millennials: Time Is Your Biggest Asset

Meet Osagie, just another Millennial trying to get his finances together.

Last week, I was chatting with some of my former college buddies about my experience so far with my United Capital Wealth Advisor, and the conversation went something like this, ‘Wake up Millennials! Time is your biggest asset.’ Ok, so I know I may sound a bit harsh but I am a Millennial too and I get just as annoyed by Baby Boomers harping on us, our work ethic, our style and our music (I don’t like Afrobeats music either, I always tell Dad). But if there is one thing our generation most certainly lacks in comparison to our parents, it’s financial literacy.

Several studies have shown that the Millennials worry so much about money. Many of us saw our parents get burned by the market during the last financial crisis and are also saddled with huge loan debt running into several millions of Naira. These factors have had one or two impacts on us: saving money inefficiently, or not saving at all.

The financial crisis, and the media blitz that ensued has done so much damage to millennials psyche that most of the money millennials have set aside are placed in low-interest paying (and sometimes high-fee charging) savings accounts. This conservative approach may provide a bit of relief from the risk of the unexpected, but not much in terms of building long-term wealth.

However, lifestyle demands have left a large percent of working 20 and 30 somethings with no savings whatsoever. In fact, the savings rate for those 20-35 is almost negligible or -2%.  Negative. Two. Percent. I would say “let that sink in” but if you’re reading this, you are most likely not surprised. Another study found that 7 out of 10 millennials define financial stability as being able to pay all household bills on time. Obviously, the general lack of savings is not from laziness or incompetence, but merely necessity. Most millennials are having to put monthly bills and household expenses on credit and at an unsustainable rate.

What’s next is nothing new. This is not the reinvention of the wheel. But if you are under 35 and feel you have all the time in the world to start saving for retirement, here are the facts as shared by my United Capital Wealth Advisor: when you start saving has much greater impact than what you are saving. And the ‘saving’ I’m talking about now is not your run-of-the-mill bank savings account, but an investment account, backed by a financial plan that makes you confident that you’ll be able to achieve your family and financial goals. i.e. A plan that assures you are on track to retire as planned and live the way you want to live by subscribing into a growth plan for long-term gains. That’s right: the mystical ‘compound interest’.

Essentially, your time horizon (how many years from retirement you are) is very important to your financial future, that if you wait to start saving, it could have devastating impacts.

My Wealth Advisor at United Capital also shared the experience of two vlients (Ibrahim and Nnamdi). They started saving and investing from scratch. Nnamdi started at 25 and saved N1m annually. Ibrahim started at 35 and invested the exact same amount. Assuming a 10% annual return, Nnamdi will have over N298m at age 60 on N35m contribution, while Ibrahim will have only N108m at age 60 on N25m contribution. In comparison, a 40-year-old would have to save N5.2m annually for 20 years (total of N104m) to have an ending account value over N298m.

N1.2m a year may seem intimidating to a 20 something, but broken down into monthly deposits, it’s only N100,000 every paycheck. If you earn a N6m salary and already participate in your company’s Retirement Savings scheme, you’re looking at only an additional 20% of gross salary as monthly contribution into an investment account. N25,000 a week!

Look, retirement and savings can be intimidating and confusing, but it doesn’t have to be. Our generation is the most educated in history, but also the most cash-strapped and the most averse about investing. The point is that you shouldn’t be. But even more importantly: if you are over 35, you can’t afford to be.

Most importantly, zero Naira invested is zero Naira earned. It’s time to stop thinking of your car, your house, or even your salary as your biggest asset. Your ‘time’ is. Each month you wait to start saving and investing, your potential net worth at retirement is taking a huge hit.

So, what can you sacrifice to drum up an extra N100,000 a month? Your Friday night bar tab? A lunch out? Your daily Espresso? You can do it! Ask questions, seek out professionals and trusted Wealth Advisors. There are more avenues of financial help than ever before,and you do not have to make wrong turns before you find the right one.

Millennials get a bad blow, and you can’t do much to change others’ perceptions of the group. But you can change your future. No Baby Boomers will be around to criticize you when you are signing up for early retirement, all thanks to N100,000 or more a month. Jump start your finances, and jump start your future.

It’s time.

 

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The goal of investment advisory is to help investors manage their money more effectively. However, the spirit behind such advice is education, including educating investors on their investments and how they work. It’s with this purpose in mind that the Private Wealth  team at United Capital form “Creating Capital” Community groups. Creating Capital is the Online subscription-based version of United Capital’s Private Wealth services.

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