Leave a Financial Legacy? Boomers and Millennials Slug It Out

Baby Boomers like to point out that our famously self-absorbed generation advocated for many good causes as youngsters and turned the corner to greater giving in retirement. Much of it is true. But younger generations are way ahead of us, new research suggests.

Maybe it’s a case of our kids doing as we say, not as we do. Boomers are the least likely generation to say it is important to leave a financial legacy—even though they have benefited from an enormous wealth transfer from their own parents, according to a new U.S. Trust survey of high net worth individuals. How’s that for self-absorbed?

More boomers have received an inheritance (57%) than say it is important to leave one (53%). The opposite holds true for younger generations. Some 36% of Gen X and 48% of Millennials have received some type of inheritance while 59% of Gen X and a whopping 65% of Millennials say it is important to leave one.

Circumstances may account for the difference in mindset. The Great Recession struck just as boomers were preparing to call it quits. With more to lose, and little time to make it back, boomers suffered the worst of the crisis from a savings point of view. A financial legacy seems less important when you are downsizing your retirement dreams.

For younger generations, the crisis created an employment nightmare. But it drove home the need to begin saving early, and those that did have seen stock prices double from the bottom and house prices begin to rebound as well. Millennials’ problem may be that they still don’t trust the stock market enough.

Well more than half in the survey remain on the sidelines with 10% or more of their portfolio in cash. Millennials are the most likely to be tilting that direction. Two-thirds of Millennials, the most of any cohort, say they are fine carrying a lot of cash and just 13%, the least of any cohort, have plans to invest some of their sideline cash in the next 12 months. This conservative nature threatens to work against their desire to leave a financial legacy—or even retire comfortably.

Millennials are the youngest adult generation and have the most time to absorb bumps in the stock market and benefit from its long-term superior gains. Intuitively, they know that. In the survey, those holding the most cash, regardless of age, were the most likely to say they missed the market rally the past few years and are not on track to meet their goals.

In our younger days, boomers rallied around things like civil rights and workplace equality for women, among other grand moral battles. But we didn’t necessarily put our money where our mouth was. Today’s young adults are quieter about how to fix the world. But they are willing to invest for change. One-third of all high net worth individuals invest in a socially conscious way while two-thirds of Millennials do so, U.S. Trust found.

By a wide margin, more Millennials say that investment decisions are a way to express social, political or environmental values (67%). Most (73%) believe it is possible to achieve market-rate returns investing in companies based on their social or environmental impact, and that private capital from socially motivated investors can help hold public companies and governments accountable (79%). I’d say the kids are alright.