3 Lies that Ruined Millennial Finances
From baby boomers to Gen X, to Millennials, and now Gen Z…
The generation gaps in worldview are staggeringly immense. Largely because of what they learned in school and the way they were raised.
When I was growing up, my poor dad, my natural father, never wanted to talk about money. As a result, he never taught me or my siblings about it. We were left to our own devices.
My poor dad was not unlike many people in his generation. For them, money was a dirty subject that was not appropriate to talk about, let alone with children. They could get away with this because, for them, things were relatively predictable.
For those of my parent’s generation, if you followed the old rules of money, you could be comfortable. This meant going to college, getting a good job, investing in stocks and saving in the bank, and buying a house.
But today that just isn’t enough.
Today, I run down the three lies that are keeping millennials down…
And four secrets that will unlock financial freedom for them and other future generations.
The Wrong Education
My rich dad, my best friend’s dad, didn’t share my poor dad’s aversion to talking about money. He saw that the way money worked was changing and he made it his mission to prepare his son Mike to thrive financially in this changing world. Thankfully, he also included me in his lessons.
It could be argued that today’s young adults are better educated than their parents or grandparents because of their access to information through technology.
This is from a Pew Research Center report from 2019:
Today’s young adults are much better educated than their grandparents, as the share of young adults with a bachelor’s degree or higher has steadily climbed since 1968. Among Millennials, around four-in-ten (39%) of those ages 25 to 37 have a bachelor’s degree or higher, compared with just 15% of the Silent Generation, roughly a quarter of Baby Boomers, and about three-in-ten Gen Xers (29%) when they were the same age.
Despite all this higher education, they have the highest levels of unemployment of any work demographic and make 20% less than their parents did at the same stage of life.
Income and Wealth
One would have hoped that the baby boomer generation would have at least learned from their mistakes and focused on financial education for their children, the millennials, but they did not.
According to a poll by Harris Poll, “Nearly 80% of millennials are not invested in the stock market.”
When asked why:
- 40% said they don’t have enough money
- 34% said they don’t know how
- 13% blamed student debt
All of these are the symptoms and excuses of those who lack financial education. If you don’t have enough money it’s because you have never been taught how to make money outside of getting a good job.
If you don’t know how to invest it’s because you weren’t taught how money works and probably told to save money and buy a house. You were financially programmed to mindlessly repeat mantras that cost you your wealth. Only 13% of Americans received any education about money.
Our school system does a good job training people to be employees. During our formative years, our families and our schools teach us to repeat what they believe to be words of financial wisdom, but in reality, they are words that train us to steal from ourselves.
If you have so much student debt you can’t afford to invest, you believed the lie that you needed to go to a good school to be successful.
Millennials Buy Into Financial Lies
The millennials clinging to the relics of the past — relics such as job security, savings, a home, and a retirement plan — will be those who are most ravaged by the global financial storm approaching.
Financial Lie #1: Higher Education
Rich dad said, “School teaches you to be an employee. If you want to be rich, don’t count on school.” So, from a very young age, I learned that the promise of higher education for success was one of the biggest lies being told. The worst part is that my generation has been teaching their children the same lie.
Financial Lie #2: Get a Job
The reason get a job is a big lie is because it makes you poorer, especially if you have a high-paying job because you pay the most in taxes. And guess who isn’t paying a lot of taxes? The owner of the business you work for. The scam gets even worse when you look at it long-term. If you do well at your job, if you claw your way up the ladder, what is your reward? A small increase in pay and a bigger increase in taxes.
Financial Lie #3: Save Money
Save money is a lie, but it used to be true. A generation or two ago, saving money paid off. You could set aside a certain amount of money and retire on it. Your parents or your grandparents might have done just that, and it worked.
But what worked for them cannot work for you in today’s economy.
The millennial generation bought into these financial lies hook, line, and sinker. That is why they are both the most educated generation and the worst off financially. During the time they were getting their college education, the cost was inflating at astronomical levels while the cost of living was going up, employment was going down, and incomes were shrinking.
The children and grandchildren of baby boomers face an entirely different world. What does a person do in a world of accelerating globalization, lower-paying jobs, low-interest rates, dangerously high government debt, rising taxes, and rising bureaucratic incompetence?
This is when real financial education becomes vital, not just for success, but for economic survival.
How Millennials Can Change Their Financial Problems
If you’re a millennial and my words have you thinking about your financial future, a good place to start increasing your financial intelligence is by understanding the four foundations of financial literacy.
Briefly, they are:
#1 The Difference Between an Asset and a Liability
Many people think they know what an asset is. For instance, you probably think your house is an asset — but it’s not. The truth is most accounting systems have made the definition overly complicated. Simply put, an asset puts money in your pocket and a liability takes money out. Follow that definition and you’ll do well.
#2 Cash Flow Versus Capital Gains
Most people invest for capital gains. The rich invest for cash flow. Another way of looking at it is investing for capital gains is like gambling. You invest your money and hope the price goes up. Conversely, the rich invest for cash flow. And if there are capital gains, that’s a bonus.
#3 Using Debt and Taxes to Get Richer
Your financial adviser will tell you that debt is bad and taxes are inevitable. But the rich understand that both debt and taxes can be used to create immense wealth. When it comes to debt, there are two kinds — bad and good. Good debt is debt used to purchase assets like a rental property. Bad debt is used to purchase liabilities like using a credit card to fund a vacation.
#4 Make Your Own Financial Decisions
When you’re not confident about your knowledge of money, you let others make your financial decisions for you. You let your broker decide how your money should be invested. You let your bank tell you what interest rate is worthy of your money. You follow whatever investing trend is popular in the news.
The key to building great wealth is having great knowledge to act on and great wisdom to know which course of action is the best. This kind of knowledge and wisdom only comes through a high financial intelligence gained from applying yourself to financial education.
Editor, Rich Dad Poor Dad Daily