Why Baby Boomers and Millennials Think So Differently About Money

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There are fewer than 20 years' difference between the youngest Baby Boomers and the oldest Millennials, but when it comes to money, the latter generation is more like their grandparents than their parents.

Economic disasters leave a lasting impression
This fact isn't surprising when you consider both groups lived through a massive economic downturn: for gramps and grandma, it was the Great Depression, while for their grandkids, the financial crisis made an indelible mark upon their psyches.

Post-World War II Boomers, perhaps spurred by their own parents to take advantage of a flourishing economic environment, seem to have a financial viewpoint all their own.

More conservative, less trusting
Like the so-called Silent Generation – aged 69 to 86 – Millennials typically admit to having a more conservative investing outlook than Boomers. Unlike other generational subsets, they tend to keep the majority of whatever wealth they have in cash: 52% of Millennials do so, compared with non-Millennials, who hold only 23% of their assets in such a liquid state.

Perhaps reflective of their mistrust of the stock market following the 2008 crisis, only 28% of Millennials' investments are in stocks, versus 46% for other age groups combined. In fact, 52% of Millennials polled by Wells Fargo recently expressed mistrust of the stock market as a good place to invest their money for retirement.

Most trusted advisors are family
Still, these differences between the two generations don't stop Millennials from listening to their parents when it comes to financial advice. Trust is huge with the younger crowd – only 19% in a recent Pew Research survey agreed most people can be trusted, compared to 40% of Boomers and 37% of the Silent Generation. When it comes to investing, Millennials, for the most part, think their parents got it right.

When asked by Bank of America's Merrill Lynch about their parents' style of investing, 65% or more of Millennials said that they thought mom and dad did a good job – and that their techniques should work just as well today as they did in the past. Similarly, 60% of younger investors told Wells Fargo that their primary source of investment guidance is family, while only 17% of Boomers said the same.

Other than family, experienced advisors get the nod
The trust issue has made Millennials much more cautious than their parents when it comes to investing, and they are not apt to invest blindly. Perhaps the biggest lesson learned from the Great Recession was that asking questions  is extremely important. This characteristic truly sets them apart from their parents: Whereas Boomers tended to invest without probing too deeply, their kids are freely admitting their ignorance of such matters, and performing due diligence.

While more than half of Boomers polled use professional investment advisors, only 38% of Millennials do so. While reflective of their overall mistrust of the financial system, those that do invest much prefer seasoned professionals.

Obviously, severe economic downturns tend to influence how people view money. Despite their different outlook from their parents and their own children, Boomers didn't escape the financial crisis unscathed, either. A recent Gallup poll shows that, despite being heavy users of banking products and services, only 12% of Boomers have a lot of trust in banks – less than any other generation surveyed.

Will Millennials' outlook change as they age? Time will tell, of course, but it looks like the younger generation will need a lot more persuading if they are to act upon the investing methods and advice of their parents.

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