Money tips for millennials

Vincent Rapisura
Living in the moment doesn't mean going broke. Here are tips for making the most of your money to make the most out of life.

The Philippines ranked 117th out of 143 countries surveyed in the Standard and Poor’s Global Financial Literacy Survey for 2014. The survey, which covered questions on risk diversification, inflation, numeracy, and compound interest, showed that only 25% of Filipinos are financially literate.

There is no surprise to these findings considering the low savings rate of Filipinos and the even lower penetration rate in terms of accessing insurance and investments.

Generation X emerged as the most literate among age groups with a literacy rate of 33%. Baby boomers and millennials came next at 23% and 22% respectively. If you were born between 1980 and 1998, you belong to the youngest generation – the millennials. Those born between 1961 and 1979 are Generation X and those born before that are referred to as baby boomers.

The internet and a different view

There are supposedly more reasons for millennials to have better financial literacy than the previous generations.

Access to information is faster due to the internet. They can research on available financial products and services online anytime they like. Information flows both ways. The sender and receiver of information can interact real-time in any part of the world. They are armed with tools to validate and confirm information or at the very least get the opinion of experts.

There have also been a lot of strides made in the development of financial and capital markets that make it easier for anyone to access financial products and services.

However, these developments did not translate into a higher financial literacy rate among millennials.

Perhaps one of the reasons behind this is the way generations view money. Baby boomers view money as something that you work hard for – labor is needed to create money. For Generation X, money is a reward or an indicator of success. 

Millennials, in contrast, view money as a tool. They need not work to have it. Creativity and resourcefulness could be used to produce money. Having money is not their goal but what it can make them do.


Many millennials live by the YOLO (You Only Live Once) philosophy. YOLO emphasizes the importance of living the “now” rather than planning for the future.

Older generations can easily see how this could spell disaster for a millennial’s financial future. Their spending behavior reveals that they buy experience. An experience could be an expression of a lifestyle – enrolling in expensive gyms, fitness programs, yoga classes, or pursuing hobbies.

It could also mean getting immersed in a culture. This explains why a lot of millennials are travel bugs. They also find satisfaction when they indulge themselves in food trips, sign up for the latest video streaming subscriptions, and party at the latest hip place. These are all expressions of YOLO. It is an expression of a lifestyle.

Financial behavior

The Social Enterprise Development Partnerships, Incorporated (SEDPI) examined the financial behavior of millennials. The research was conducted from January to September 2016 where 75% of the respondents were college graduates.

The research revealed that 50% of millennials are overburdened with debt. One is overburdened with debt when monthly installment payments exceed 20% of monthly income. They used loans mainly for consumption – to fund their YOLO lifestyle.

These loans are clearly non-productive since these do not generate income. Millennials are encouraged to get into debt due to the relative ease in accessing credit these days. There is also high peer pressure to conform and keep up due to the advent of social media.

Eight out of 10 millennials do not have adequate emergency savings while only half have life insurance. Adequate emergency savings is equivalent to 9 months’ worth of expenses. The YOLO lifestyle probably fuels this lack of a habit of saving.

On the bright side, there are more millennials who have investments compared to older generations. They are twice more likely to have investments and are also more active in financial and capital markets.

Their increased participation is due to a more developed financial and capital market, and ease in access to financial products and services. The environment plays an enabling role for millennials to invest given the fact that they are generally more comfortable with risk compared to older generations.

Financial tips for millennials

YOLO and FOMO (Fear of Missing Out) are immediate challenges that millennials need to manage. Both are manifestations of consumerism. These two are not bad all together. When managed well, these could be a source of inspiration to jumpstart one’s financial health.

While older generations look at the YOLO lifestyle as a set of wants, millennials consider them needs. Millennials should learn to recognize these as mere wants early so that they have better guidance when making financial decisions.

  • Save and invest early to create passive income

When setting their financial goals, millennials could get motivation from the YOLO lifestyle that they aspire, keeping in mind that these are wants. Wants should be financed through passive income while needs are financed through active income. Passive income comes in the form of interest, dividends, rental income, capital gains, royalties, and pension.

Most of these could be earned through investments. Millennials have the most valuable resource working for them – time. If they start early, they can take advantage of the power of compounding interest and earnings.

  • Resist consumer credit

Debt is a double-edged sword. It could make you poor when used in non-productive purposes or it could make you rich when used as leverage in productive purposes.

Handle debt with care. Loans should never finance wants. The least you could do is save up for that want. A better strategy is through delayed gratification. Save and invest until your investment creates passive income to finance the want.

  • Start small but dream big

Most of those who made it big started small, so do not underestimate the power of starting small. What matters is the act of initiating something. It could be starting to save a small amount every month, trying to reduce expenses a bit, or investing a small amount. Today you can open bank accounts with as little as P100. You can also open investment accounts with as little as P5,000.

The key is to be consistent and disciplined to establish good financial habits. These habits will lead you to achieve your financial goals.

  • Use the internet to educate yourself

Make use of the internet to enrich your knowledge on financial products and services and how financial and capital markets work. Older generations did not have the luxury to access information at their fingertips. The financial and capital markets were also not as well developed as they are today. Interact with people who you think are good sources of information on personal finance. Seek their advice and guidance.

Most millennials take this for granted but for older generations the media we grew up with – newspaper, radio and television – were only one way. It was difficult to interact with the sender of information. Engage experts and experienced financial advisors through social media now that you have the chance to do it.

  • Identify what makes you happy

Having a lot of options and choices makes millennials’ decision-making process even more difficult. A little bit of introspection to know yourself is beneficial for your financial future. If you know what makes you happy, it is easier to plan for your future. Knowing yourself is also a function of your needs or wants and you must learn which needs or wants to prioritize. Whatever your choice, this will be expressed as your lifestyle.

Balancing enjoying the “now” and preparing for financial freedom is a tough job. Hopefully the money tips above would enable you to make the right financial choices and live a prosperous life. After all, you define your own happiness with the choices you make. –

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