The Millennial and Gen-Z Guide to Money, with Laura Whateley
With the topic of money becoming increasingly more mainstream, financial journalism has played a key role in opening up the conversation around money, providing engaging and easily consumable content.
Through magazines and articles, financial journalism can break down money taboos, amplify different voices, and give consumers a platform to be heard.
My guest today is Laura Whateley, an award-winning journalist, and author of The Sunday Times best-selling book, 'Money: a user's guide’. This is the essential guide to financially empower and educate Millennials and Gen-Z on the principles of money management, now with a new chapter added for 2021.
In this episode, we take a look at some of the generation-defining money issues Millennials face today (housing crisis, problem debt and saving for the future), the impact social media has on our spending, and what a career in financial journalism has taught Laura about her own personal finances and relationship with money.
***
You can listen (47 min) and subscribe here:
***
1. The role of social media in the world of personal finance
According to a report by The World Economic Forum (2019), Gen Z spend just under 3 hours per day on social media platforms, while Millennials spend around 2 and a half hours per day dedicated to the infamous scroll. With social media so pervasive in our everyday lives, its increasingly active role in transforming the personal finance landscape, both in terms of our attitudes towards money and managing our finances, should come as no surprise. Laura explains that social media can be instrumental in both incredibly positive and incredibly negative ways.
A study undertaken by Allianz Life (2018) has underlined the notable impact of internet influencers and of those followed on both Gen Z and Millennial consumers, with 57% of those interviewed admitting to have made impulsive and excessive purchases because of the content they saw on their social media feeds. With influencers propelling sometimes unrealistic consumption-fuelled images of designer clothes, boozy brunches and exotic get-aways, it can be hard to block out the FOMO that urges us to spend rather than save. This is only worsened when the ‘normal’ friends we follow exaggerate their lives in glamorous social media snapshots, culminating in a mainstream cultural rhetoric that we should be splurging our money to keep up with the latest trends and showcasing our most extravagant purchases. The difficulty is that we cannot see beyond the portrayed lifestyles of the people we follow on social media. We spend more time looking at how our friends spend than how they save, and we don’t actually know what their bank accounts look like - who wants to see a budget spreadsheet on their Insta feed when you could be updated on the latest lockdown trend? This disconnect from financial reality can be hugely problematic.
Despite these criticisms, we have seen a large uptake in the number of ‘influencers’ leveraging social media platforms for good. Communities have begun to form around content creators that are bringing financial education to social media, opening up a traditionally taboo topic for conversation; far from viewing money affairs as something that should be kept private, users are drawn in by people who are happy to share their real-life experiences of managing their personal finances and all the emotions that arise in the process. These communities have provided an avenue for improving financial literacy and ability, resulting in positive financial outcomes and user satisfaction. Clare Seal is one such example of creating a safe space in which her followers can have honest, helpful conversations about money. Clare began her Instagram, ‘@myfrugalyear’ as an outlet for how she was feeling about her troublesome debt, with over £25,000 of debt spread across 7 credit cards and a £2,000 sum in planned overdrafts at the time (listen to The Wallet episode with Clare). By speaking up, she was able to draw on a supportive community of people, all with their own money worries, to help her keep accountable on her journey. In just a couple of years, Clare managed to repay her credit card debt and now has £11,000 outstanding, while inspiring her 69.6k Instagram followers to drop the stigma attached to discussing debt in the process. Laura explains that communities such as these are crucial in the personal finance space, removing the disconnect between the lavish lifestyles we see on our social media feeds and reality. Debt is the perfect example of this: in the UK up to 8.3 million people are unable to pay off debts or household bills – something we could not deduce by scrolling through social media platforms. Gen Z and Millennial Instagram users have also benefited from money communities that provide free financial guidance from like-minded people that are unlikely to be able to afford financial advisers themselves. For the minority that can afford financial advisers, social media platforms can be a great way to get a glimpse of financial advisers’ personalities, with their online profiles reflecting their outlooks and personal styles of engagement.
2. Laura’s expert tips
Since her first role at The Times’ money desk, Laura has tirelessly sought to educate, empower and encourage people to work towards their financial freedoms. For Laura, financial freedom is the ability to make personal decisions free from financial constraints: to be able to leave unhealthy relationships without worrying about money; to be able to change career path without worrying about the financial disruption that it would cause; to be able to go freelance and pursue your dream job without the stress that comes with unpredictable income streams. Thought of in this way, financial freedom can seem like both a daunting and confusing journey – this is even before we consider that financial freedom can mean different things to different people. Although there is no ‘one-size-fits-all’ approach to winning financial freedom, it is important to set financial goals, take control, and work towards them. Laura explains that working to achieve your financial goals is a bit like fitness and dieting: what works for you, might not work for someone else, and being realistic about what kind of person you are is likely to produce better results towards meeting your targets.
Laura’s tip for helping you to define your financial goals is to think about what money means to you and to decipher your own attitudes towards money. She explains that this is a fundamental step since we don’t often look at our interactions with money, yet it is one of our most important lifelong relationships. Understanding how your attitudes are shaped will help you to understand what you want to achieve in the short-, medium- and long-term, and help you to understand how best to get there. In fact, a psychological study based on the BBC ‘Big Money Test’ revealed that your chance of getting into financial difficulty is not solely about how financially savvy you are or how much you have in the back, but rather your relationship with money. The results of the study suggest that certain attitudes towards money (for example those that spend money to show status) make the people with those attitudes more vulnerable to financial woes. Laura recommends that, in order to understand your money mindset and become healthier in your relationship with personal finance, you should track the thoughts that come up each time you make a money decision. Given that we make so many financial decisions on a daily basis, it won’t be long before you can see a pattern developing that will expose your attitudes and deepen your self-awareness. With greater clarity on mindset, you can identify beliefs and rituals that impact your ability to create and stick to your financial goals.
When it comes to putting yourself in control of managing your personal finances, Laura is a big advocate of budgeting. The more you are able to financially plan ahead, the more stress, time and money you will be able to save, and the more likely you will be able to treat your future self. Budgeting is the perfect way to get a quick snapshot of all the money you have coming in and going out – this can be particularly helpful if you have multiple income streams or keep your money in several different accounts. Not only will budgeting make you less likely to fall into debt, get caught off-guard by unexpected costs and improve your credit rating, budgeting will help you to identify the key areas where you can make savings. By optimising your spending, you can be kinder to your future self, for example by investing more into your pension. The benefits associated with saving money in the form of an emergency fund should also not be underestimated, especially in the uncertain climate we currently find ourselves in. Laura shares with us that there are some great free budgeting apps available, with banks such as Monzo and Starling offering budgeting tools that extract information directly from your transaction history to help you optimise, and neutral platforms such as Money Dashboard from which you can view all your accounts in one place.
Laura’s best piece of financial advice for her past self is simple: start early. In the Wallet podcast, she opens up about the fact that, when she started work, she was not automatically enrolled into a private pension scheme and this has made her save more in later years. The best time to start a pension is when you are young because only then can you let your contributions make full use of compound interest. This means that small early savings can be more important than larger later savings. By drawing on the theory of marginal gains, it does not matter if you can only afford small contributions: the earlier you start, the more you can benefit from compound interest. Emilie highlights the power of compound interest in her ‘Investing for Beginners’ workshop. Above and beyond compound growth, pension contributions also benefit from tax relief - and if you have an employer: employer’s contributions. When you make a payment into your private pension, the government repays you tax at the highest rate you normally pay, effectively meaning that you are ‘given’ additional money. For example, if your rate of income tax is 20%, your pension provider will claim it as tax relief and add it to your accumulating pension pot (“relief at source”). If you are not in a fortunate enough position to have put money away into a private pension, Laura explains that the most important advice she can give is to be kind to yourself, forgive yourself for any ‘mistakes’ you feel that you have made and celebrate the small wins along the way.
3. The housing crisis
Laura begins her Sunday Times bestseller, ‘Money: A User’s Guide’, discussing the generation-defining money issue for those under forty: the housing crisis. Average housing prices have far outpaced average earnings across the UK, making it far more unaffordable to buy a house than used to be the case. Laura draws on the findings of a report published by the Office of National Statistics (ONS) to illustrate the pressing issue faced by Gen Z and Millennials: in 2017 the price of a home in London was a multiple of 13 times the wages of full time workers aged 22-29, while in 1999 it was a multiple of 3.9 times the then average incomes. Given that the relationship between housing prices and salaries has broken down, it is crucial that we educate ourselves financially to overcome some of the unique obstacles that we face as younger generations. The impact of house prices outstripping wage inflation extends beyond the financial, the housing crisis has distorted the social fabric of our society; relationship dynamics have significantly changed between families as Gen Z and Millennials are three times more likely to move back in with their parents than Gen X, more than twice as likely to put off getting into a romantic relationship, and twice as likely to delay having children (Trussle, 2019). In addition, the housing crisis has contributed to the increasing socio-economic inequality in the UK. Not everyone has a rich parent that can help them with the deposit for a property and those that can are in an economically privileged place themselves, further perpetuating economic inequality across the generations.
In ‘Money: A User’s Guide’ and this episode of The Wallet, Laura discusses why investing in residential property should still be a top goal for most even in spite of the structural change in homeownership. She also offers her expert guidance to help us get onto the property ladder and to overcome these unique generational challenges.
***
You can listen (47 min) and subscribe here:
***
Resources:
You can follow and connect with Laura at:
Twitter: @LWhateley
Instagram: @laurawhateley
Book: Money: A User’s Guide
Laura shared some apps in this episode:
Starling Bank
Monzo
Coconut
Money Dashboard
Yolt