Alas, there are some people who are lucky enough to be both young and rich.
And a report released recently 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% of young investors said they wanted to be ready to pounce on the right investment opportunities when they arise. Another 31% 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 that are encouraging other millennials to build up a cash cushion.
About 28% of young millionaires said it was important for them to have cash as a way to protect themselves from market volatility, according to Capgemini. But there is a cost to holding too much cash, said Greg Popera, a private wealth advisor 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% 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% 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 advisors say.
By branching out into real estate, which can lead to rental income, investors are creating additional income streams that are not tied to their main jobs, financial advisors 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% — 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% of assets were with a primary wealth manager, compared to 27% for millionaires of all ages in North America.
They invest with a purpose. Many young investors — and not just the rich — want to know that their dollars are going toward the social causes that matter to them. Some work with an advisor to dedicate a portion of their money to companies they feel are working to advance a certain issue, such as climate change.
The approach is particularly common among younger investors. Some 60% of millennials and 34% 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.