In the iconic Harry Potter series, we are introduced to many personalities: fearless Harry, gregarious Ron, bossy Hermione, mean Malfoy, and so on.
Deep down, however, millennials are probably closer to the character of Neville Longbottom, especially when it comes to financial matters.
Neville deals with a lot of problems: he has a poor memory, which doesn’t help with the increasing workload in school; he always needs to buy new things (because he loses his things so easily); and he’s unsure of himself, making him a target for bullies like Malfoy.
Drawing some reference, millennials are trying to live their lives as best as they can in this uncertain world whilst dealing with rising costs of living1 on top of student loans and credit card bills.2
Why didn’t Neville try to change his life though? Possibly, he didn’t know how. Being a first-year student, it’s also his first time dealing with wizarding subjects, a new environment, and mean personalities.
Millennials are somewhat similar. When it comes to financial literacy, perhaps most are “first-year students”. On average, only 56 percent of millennials in major advanced economies and 32 percent of those in major emerging economies were found to understand basic financial concepts.3 Clearly, there is homework to be done.
Neville’s character is also shaped by his home environment. With his parents famously known for having been aurors (very skilled wizards), his teachers and grandmother have high expectations of him. Neville is therefore timid and afraid of making mistakes.
Similarly, the world around us, our parents’ experiences and their expectations affect our perceptions. In fact, millennials have been found to be the most conservative investors compared to other generations, with most of their investments in cash deposits and bonds.4
But by doing so, millennials may be putting their retirement security at a higher risk, especially when you consider millennials’ advantage of time. Being relatively young, millennials can afford a lot more risk. Even if an investment seems too risky now, it might bear fruit later.
Towards the end of the first book, Neville mustered up his courage to stop Harry, Ron and Hermione from sneaking out of the dormitory to avoid getting into trouble again. It was a futile attempt since Hermione cast a body-binding spell on him, but it was worth the try. Neville’s bravery won him 10 points for Gryffindor.
Investing as a millennial is not easy, given the existing financial burdens. But there is more to be gained by trying than not. Let’s learn from Neville to make the right — but not always only safe — decisions.
With millennials making up most of the world’s population today, understanding them will be key in knowing which forces will shape society, businesses and investments. Tap on Eastspring Investments’ insights at www.eastspring.com