Gen Y investing earlier than parents

In the ongoing fiscal war between Millennials and the Baby Boomers, chalk up at least one battle to the youngsters: they might not have much money, but they invest it far sooner than their parents ever did.

According to the latest TD Investor Insights Index, Millennials, also know as Generation Y, made their first investment at age 20 compared with Baby Boomers who didn’t reach the same financial milestone until they were 27.

But Gen Y, which for polling purposes counts as those aged 23 to 33, may have learned a thing or two from their folks. Boomers - those between 53- and 66-years-old – are a key source for financial advice.

The survey released Monday found that 41 per cent of Millennials said their parents or relatives were the ones who prompted their first investment. That compared to just 19 per cent of Boomers who said they were encouraged to initially invest by their family.

And, unlike Boomers, Gen Y isn’t as likely as their parents to seek outside advice. The poll found that while 40 per cent of Boomers used financial advisers, just 23 per cent of Millennials turned to professionals, opting instead in larger measure to lean on family.

“As a parent, it’s very interesting to me that the younger generation is paying attention to the kitchen table chatter and it’s sticking in a good way,” said Cynthia Caskey, vice president and portfolio manager with TD Wealth Private Investment Advice, who has children aged 17 and 22 and considers herself a member of Generation X.

The poll also found that the newest entrants to the workforce also socked away an average of almost 18 per cent of their income to investments, but hoped to pump that up to about 30 per cent of their earnings.

Those numbers are stunning in light of what’s happening across the country in general.

According to Statistics Canada, just 5.5 per cent personal disposable income was earmarked for savings in the first quarter of 2013, but that rate is much better than the household low of 0.9 per cent that was reached in 2005.

“It was a pleasant surprise that Gen Y is tuned into investing (a) lot earlier; and (b) a lot more than I would have expected given some of the challenges they face,” said Ms. Caskey, who pointed to high student loans and education costs, expensive housing and muted job prospects. (Those are the same financial woes that Millennials usually blame on boomers for passing on.)

Interestingly, a hike in income didn’t have the same impact on Millennials as it did on their parents’ generation. The poll found that while 36 per cent of Boomers were moved to invest because their paycheques increased, just 23 per cent of Gen Y respondents said higher pay made the difference.

Adrian Mastracci, a portfolio manager with KCM Wealth Management Inc. in Vancouver, himself a Baby Boomer, has watched this “more savvy, more inquisitive” generation emerge.

“The young adult is more well-versed that comes in today than they were 20 years ago,” Mr. Mastracci said. “I think they were immersed in it early and they grew up with it.”

He said this young generation either just missed the 2008-09 global financial meltdown or simply shrugged it off and carried on. His best advice - learn how to invest the right way by taking the focus off performance, dividends and short-term returns – appears to be already in their sights.

About six in 10 said they are funneling their savings into mutual funds. Slightly more than a third said they invested in GICs or term deposits, while 31 per cent said they had their money in individual stocks.

Meanwhile, half said their top investment goal is retirement savings. About four in 10 respondents then highlighted to home buying, travel and financial independence as their priorities.

The focus on saving for retirement suggests Gen Y recognizes that companies are pulling away from pricey pension plans while government programs are shrinking, according to Ms. Caskey.

“They are being quite pragmatic,” she said.

The poll, which was conducted last April by Head Research, of 1,002 adults from both age groups who had at least one investment product and bought or sold one such vehicle within the previous 12 months.