With Father’s Day right around the corner, there seems to be no better time to thank Dad for all he’s taught you … whether he meant to or not.
Yesterday, I chatted with Steven and Jason — a father-son team that makes up Kolinksy Wealth Management. The pair shed had interesting insights on the differences between generations when it comes to saving and investing.
One takeaway: In many cases, younger folks are actually more conservative than their older counterparts, because they’ve watched their parents overextend themselves on credit and suffer through downturns, bursting bubbles and more.
Some highlights of the interview are transcribed below:
AO: I’m most interested in generational differences when it comes to wealth management. Do you think kids coming up these days don’t generally work hard or don’t have the saving habits that they need?
Steven: I think it’s a very tough world compared to what it was 10 or 15 years ago. If you graduate right now, it’s very difficult to find a job. If you find a job, it’s very difficult to accumulate. And there’s no such thing as a $100,000 starting condo. When I started in this business in 1982, I had clients buying first homes at interest rates of 18%. Today, we have a low-interest-rate environment, but we don’t have the ability to buy homes to two times our income like we did 25 years ago.
Jason: I think, as far as my generation goes, I see us as definitely being more mindful of the money we spend. I try to stress to younger clients of mine that you need to rely on yourself because there’s no such thing as a pension anymore … and who knows, for that matter, if there’s even going to be Social Security.
AO: In the age of information we live in, do younger clients you deal with tend to be more informed and maybe need less hand-holding?
Steven: I think technology is a great thing and gives you more information at your fingertips than there was when I was younger, but I don’t think that technology in investing is really changing much. You just need a plan — the same as 25 years ago. You take 10 cents of every dollar you make and try to put it away and work toward a goal. The basics of savings and of trying to get ahead are the same.
Jason: The age of information has good and bad to it. On the bad side, some people have a wealth of information but don’t really know what to do with it. But on the other side, it does make it easier if you are trying to save and put investments away, as you have access to a ton of information to help make good decisions. Not everyone can work with an adviser, and they can get the information that they need.
AO: Generally as you get older, conventional wisdom says you should get more conservative … but it almost seems like the normal age differences have been skewed lately. About-to-retire folks might be taking more risks to make up capital they lost during the recession, while it seems like a lot of young people are skittish about jumping into the market at all. Do you guys see that?
Steven: Yeah, you’re absolutely correct. If you were at retirement age 10 years ago, income was producing 6% or 7% yield. Today, Treasuries are producing 1.5% or 2%. So my generation has to get a little more aggressive in their portfolio, and look at alternative investments besides stocks and bond to try and increase the income they retire on.
Jason: I agree with what you said as well. Growing up, I’ve seen the tech boom, the bubble, the burst, I’ve seen the housing crisis, the credit crisis, the beginning of the 2000s when we were in a recession … so I think the younger generation is definitely more conservative and skittish about the market. I also think people are looking into fees and the cost of investing more. Many like the idea of exchange-traded funds.
AO: You mentioned that basics of it all, despite these changes, have stayed the same. Do you have any quips or advice that you think are timeless?
Steven: Yes. One: It’s never to early to start. Two: It’s never too late to start. Three: Compoudning really affects money. People say “I’m 21, I don’t need to think about retirement.” Well, you should have a 401k if you’re working. People say, “Oh, I’m 55 … it’s too late.” No it’s not — you have 10 more years, tuck it away.
Jason: One of the things that I live by is don’t carry a credit card balance. I also believe in insuring the most important thing, which is your life and ability to make an income. And I definitely agree with my dad. I think the power of compound interest is tremendous. Whether it’s 3% a year or 7% a year, over time, it’s a powerful, powerful tool.