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Alas, there are some people who are lucky enough to be both young and rich.
And a report released last month by Capgemini Consulting showed some interesting trends in the strategies young millionaires use to manage their money.
In many ways, millionaires under 40 are even more conservative than their boomer counterparts. They are more likely to hold on to cash, less likely to invest in stocks and more prone to stashing money in alternative investments.
The findings, combined with other studies on how the younger-than-40 crowd handle their money, may even offer lessons for people who don't have much wealth yet but are striving for it.
Here are some of the money management strategies that stand out among the young and wealthy.
They have plenty of cash on hand. Millionaires under 40 held about a third of their total assets in cash, including physical cash and money kept in the bank, like a checking account, according to the report. When asked why it was important for them to have so much cash, 17 percent of young investors said they wanted to be ready to pounce on the right investment opportunities when they arise. Thirty one percent said they wanted money on hand to be able to live the lifestyle they want. (Those vacations, shopping trips and nice meals need to be paid for somehow.)
Millennials who are more concerned with paying off their debt and covering the bills may have a hard time relating to that mentality. But some of the motivations pushing young millionaires to have cash in the bank aren't that different from the reasons encouraging other millennials to build up a cash cushion. About 28 percent of young millionaires said it was important for them to have cash as a way to protect themselves from market volatility, according to Capgemini. It's in line with other studies suggesting that millennials are nervous about taking on too much risk with their savings, even if they won't need the money for a while. But there is a cost to holding too much cash, said Greg Popera, a private wealth adviser with Merrill Lynch. People who neglect to invest at least part of their funds in stocks, real estate and other assets may miss out on potentially higher returns over time, he said.
They spread their bets. As for the part of their wealth that is being invested, the young and wealthy are not relying too much on any single approach. Roughly 30 percent of their assets were held with wealth managers who could help them build a portfolio of stocks, bonds and other traditional investments. But about 40 percent of their portfolios were split up among less traditional investments including real estate, a business and other alternative investments.
That broad category of alternative investments can include gold, hedge funds or other asset classes that are expected to behave differently than the stock market, financial advisers say. For example, while stock markets were plunging on the day after Britain announced it had voted to leave the European Union, the price of gold soared.
By branching out into real estate, which can lead to rental income, investors are creating additional income streams that are not tied to the stock market or to their main jobs, financial advisers say. Investing in a business by buying a sizable stake in a company or by starting a small business can boost wealth and lead to big payouts when a business does well. But because such investments always require more risk, business investments tend to make up a smaller portion of the overall portfolio - about 13 percent - when compared to cash.
They consult friends and the web. When seeking advice on how to best manage their money, younger millionaires are more likely to turn to family, friends and the internet for guidance than they are to hire a professional when compared to older generations. Consider, among the under 40 group, just 17 percent of assets were with a primary wealth manager, compared to 27 percent for millionaires of all ages in North America. And a separate study from TD Ameritrade found that 28 percent of millennials turn to their friends for financial advice, compared to 15 percent of boomers, who were more likely to turn to a professional.
"More and more we know that for this newer generation, traditional wealth management does not work," said Tej Vakta, senior leader of global capital markets with Capgemini Financial Services. Younger investors were more likely than boomers to say that it was important for their adviser to offer online services that allow them to track or control their investments, Vakta said. But demand for online options is growing among all investors: Sixty-seven percent of millionaires of all ages said this year that they wanted an automated advice option, or a so-called robo-adviser, up from 49 percent in 2015, according to Capgemini.
They invest with a purpose. In addition to looking for investments that will boost their portfolios, many young investors - and not just the rich - want to know that their dollars are going toward the social causes that matter to them. Through a strategy known as socially responsible investing, some investors work with an adviser to dedicate a portion of their money to companies they feel are working to advance a certain issue, such as climate change. In other cases, investors will ask their advisers or brokerage firms to exclude industries they don't want to support, such as alcohol companies, tobacco companies or gun manufacturers. Investors can also use mutual funds or exchange traded funds that offer similar strategies.
The approach is particularly common among younger investors. Some 60 percent of millennials and 34 percent of Generation X investors said they wanted to use or were currently using social impact investments, according to a 2015 report from U.S. Trust, a unit of Bank of America.
"It's a feel good return," said Richard Dale Horn, senior vice president of wealth management for UBS Financial Services. Still, investors should make sure that their efforts to exclude certain industries don't leave them investing too heavily in any one sector, Horn said. "I think you have to have a balance."
