Iona Bain, Writer, Speaker, Broadcaster and Blogger specialising in young finances
Iona is a panellist at The Scotsman’s free Annual Investment Conference on Tuesday 30th March in association with Martin Currie Global Portfolio Trust and Rathbones. Register here.
Other webinar panelists include David Coombs, Head of Multi-Asset Investments, Rathbones and Zehrid Osmani, Portfolio Manager, Martin Currie Global Portfolio Trust
When the Chancellor gave his Budget speech this month, there was no mention of Quantitative Easing – the two magic words at the heart of economic policy since the financial crash.
But QE is the gift that keeps on giving for shareholders for many reasons. Stock markets go “yay” when central banks inject money into the economy, while companies can invest and become more valuable if they can borrow cheaply.
Plus, if people can’t earn high interest on bonds or deposit savings, they look for better options elsewhere – like shares. Most economists now believe QE will become a mainstay of modern economic policy. Who has benefited from all this? Shareholders and homeowners, who tend to be older people. Millennials have largely missed out on this whole asset-boosting orgy.
That’s why we’re hearing so much about intergenerational inequality. And this itself is inflaming intra-generational inequality – the two-track economy among younger people. Those who can access the Bank of Mum and Dad are doing far better than those who can’t. And that divide is only likely to widen post-Covid.
It’s a sad irony that the young people who need the most financial guidance and support are the ones least likely to receive it. We used to talk about the haves and the have-nots: now, it’s about the havehelps and have-no-helps. Now you can see why QE is accused of promoting huge inequality, both between AND within generations, by inflating the prices of assets that richer, older investors already own.
But we also need to cut the baby boomers some slack. Yes, parental handouts exacerbate the financial differences among millennials. But what else are families supposed to do? Should they hold back in the vain hope that governments will step up? If our parents hadn’t got involved and become one of the largest mortgage lenders in the UK, where would many of us be now?
Plus, boomers have suffered their own woes, from mis-selling scandals to an array of unexpected charges and taxes on their pensions. And they endured the Wild West of banking and financial advice in 1980s–1990s. Bad boys in finance are nothing new! Besides, we weren’t the only ones screwed over by low interest rates and QE. Many baby boomers scrimped their butts off to pay down mortgages when rates regularly hit the double figures % in the 1970s
and 1980s. Was it too much for them to hope they could draw on the interest from their savings in retirement? Seemingly yes.
And really – what’s the point in feeling bitter and hopeless? My motto on the Young Money Blog is: “Don’t get mad, get informed.” Plus, there’s good news. We have far more power than we think.
There’s a raft of big reasons why we matter. Millennials belong to the biggest generational cohort since the boomers, and we make up more than a third of the modern workforce. That makes us a collective force to be reckoned with. We are in the driving seat when interacting with brands – financial or otherwise. Where our parents had to be loyal to a limited choice of companies, we can be fickle. Technology is progressing at its most rapid rate in history, improving access to and quality of services all the time. A universe of information is now at our fingertips.
We can be value conscious. This doesn’t mean chasing the lowest costs above all else. What I’m talking about is weighing up costs accurately so we shouldn’t pay more than is necessary. I won’t pretend we are in a utopia where all costs are easy to compare. But things are slowly getting better and young people can take advantage.
Some of us have actually got some cold, hard cash coming our way. Millennials are in line for a future £5.5 trillion windfall from baby boomers and five million people aged between 25 and 45 reckon their inheritance could be worth £50,000 or more, according to one estimate.
In July 2020 the Institute of Fiscal Studies said a quarter of people born in the 1980s are set to inherit £300,000 or more.
For anyone lucky enough to come through the pandemic with their finances on an even keel, big choices may loom ahead.