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The Street
The Street
Business
Dan Weil

Rich Young People Focus on These Investments

Youth may be wasted on the young, as the saying goes, but plenty of time is spent by plenty of people trying to figure out what young people think and what they will do.

If you’re interested in the financial views of young people who are wealthy, the 2022 Bank of America Private Bank Study of Wealthy Americans is for you. It surveyed people with investable assets of $3 million and up. And it counts younger people as 21-42 years old.

A total of 73% of younger people believe it’s impossible to achieve above-average investment returns solely with traditional stocks and bonds. But only 32% of people 43 and up feel that way.

The youngsters said they allocate 16% of their portfolio to alternative investments, compared to 5% for the elder cohort.

When it comes to sustainable investments, they’re important to the younger cohort. 73% of them have sustainable investments, up from 37% in 2018. For the older group, the figure stands at only 21%, up from 11% in 2018.

Among sustainable investment owners, 75% of the younger group see evidence of strong financial returns and of positive impact. That compares to about half of older sustainable investment holders.

Art Collecting

Also, “younger people showed more interest than older people in tangible goods, including art,” the study says. “They collect it mainly for aesthetic value, rather than to generate investment gains.”

Meanwhile, “older collectors may still hold the works of highest value, but younger collectors are more likely to be active in the art markets,” the study says.

A total of 60% of all collectors have purchased art in the past 12 months, but 83% of younger collectors. And 58% of all collectors plan to sell a valuable work in the next two months, compared to 76% of younger collectors.

As for philanthropy, “half of philanthropic individuals support the same causes as their parents, but three-quarters say they prefer to establish their own philanthropic identity,” the study said.

“There are also generational differences in giving methods. Younger people are two to three times more likely [than older people] to give using structured vehicles, like donor-advised funds, charitable trusts and family foundations.”

Financial Woes for the Young

Meanwhile, another recent study says young people have plenty of financial woes, thanks to the 2008 financial crisis and the covid pandemic.

“Millennials [born 1981-96] and Generation Z [born 1997-2012] have experienced constant economic uncertainty,” said Michael Hershfield, Chief Executive of payments service Accrue Savings. His comments accompany an Accrue survey about personal finances among generations.

As for millennials, “entering the job market during a massive economic downturn, they have struggled to gain financial stability and have been hit with tidal wave after tidal wave of world-shaking events,” Hershfield said.

“Gen Z has had to cope with technology pushing perfection, head-spinning U.S. and global politics, and a looming recession.”

The effect of these factors on younger generations is potent, Hershfield said. “They are spending beyond their means, they feel pressure to keep up appearances, and they are anxious about saving.”

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