If most of us search our minds, all we want to do is solve today’s money problems and be alright. But we can do more. It is possible to build lasting wealth, even to include coming generations, and financial planning is a critical aspect of wealth creation and management, ensuring the preservation and growth of one’s assets for the future. While this concept has been around for years, the approach to wealth management is evolving, especially for the younger generations — Gen Z and Millennials.
In Nigeria, these generations face unique challenges – from rising inflation to increasing dollar costs, but also opportunities like the growing equities market, making tailored strategies essential for their financial success. As your Prosperity Partner, we’ll explore wealth management strategies for the Nigerian audience, focusing on the younger generation.
Common mistakes Nigerian Millennials and Gen zs make that hinder wealth management
While Nigerian Millennials and Gen Zs have the potential to achieve financial prosperity, certain decisions and behaviours can impede their wealth management journey, such as:
Neglecting financial education:
One of the most significant mistakes young Nigerians make is neglecting financial education. Many Millennials and Gen Zs are not adequately informed about financial planning, investing, and managing their money. This lack of knowledge can lead to poor financial decisions and missed opportunities for wealth creation.
Solution: To overcome this hurdle, young Nigerians should proactively seek financial education. This can include reading books on personal finance, attending financial literacy workshops, and following reputable financial experts. Additionally, working with a financial advisor can provide valuable guidance and insights tailored to individual financial goals.
Cutting oversized coats:
Some Gen Zs and Millennials fall into the trap of living beyond their means. Whether it’s succumbing to peer pressure, overspending on non-essential items, or accumulating unnecessary debt, this behaviour can hinder wealth accumulation.
Solution: Creating a budget and sticking to it is crucial. We should always try to differentiate between needs and wants, prioritise savings and investments, and avoid unnecessary debt. By adopting a frugal lifestyle and living within your means, you can free up more funds for wealth-building endeavours.
Procrastinating on investment:
Another common mistake is procrastinating on investment. Many young Nigerians delay investing, thinking they need a substantial amount of money to get started. However, time is a critical factor in wealth creation, and the longer one waits to invest, the more potential returns are missed.
Solution: Start investing as early as possible, even with small amounts. The power of compound interest can significantly boost your wealth over time, it is a gift that keeps on giving. Companies like Coronation Asset Management and Coronation Securities with expert financial advisors on board to offer accessible investment opportunities and financial advice are making it easier for young Nigerians to embark on their investment journey.
Ignoring emergency funds:
Some Millennials and Gen Zs underestimate the importance of emergency funds. Without a financial safety net, unexpected expenses or emergencies can lead to financial setbacks, pushing them further away from their wealth management goals.
Solution: Prioritise building an emergency fund that covers at least three to six months of living expenses. This fund provides financial security and peace of mind, allowing you weather unexpected financial storms without derailing your long-term plans.
Not seeking professional advice:
Many young Nigerians try to manage their finances independently without seeking professional advice. While self-education is valuable, it’s essential to recognise when expert guidance is needed.
Solution: Consider consulting with a financial advisor who can offer personalised financial planning, investment strategies, and insights into wealth management. An advisor can help navigate the complexities of financial markets and tailor recommendations to individual financial goals.
Underestimating the power of technology:
Some Nigerians underestimate the power of technology in wealth management. They may be hesitant to embrace digital platforms and fintech solutions that can simplify investment and financial planning.
Solution: Embrace technology and the convenience it offers. Digital investment platforms, mobile banking, and budgeting apps can streamline financial management and provide real-time insights into one’s financial health. Leveraging these tools can make wealth management more accessible and efficient.
While young people face unique challenges in their wealth management journey, building wealth cannot continue to be a distant dream; it’s an achievable goal.
The financial landscape for Millennials and Gen Z in Nigeria:
Nigerian Millennials and Gen Zs are ambitious and forward-thinking. They aspire to achieve financial independence, own homes, and secure their children’s education. Many of them also aim to start their own businesses. To realise these dreams, however, they require sound wealth management strategies.
These generations are digitally savvy, making it easier for them to access financial information, use mobile banking services, and invest in financial assets online. This technological advantage gives them all greater flexibility and control over their investments.
The traditional path of finding a stable job and sticking to it is less common among Millennials and Gen Z in Nigeria. The gig economy, freelancing, and multiple income sources are more common. As a result, their income can be irregular, emphasising the need for sound financial planning and solid wealth management strategies.
Case study: building wealth for a Nigerian Millennial
Take the case of Chioma, a 28-year-old Nigerian Millennial with a bachelor’s degree in computer science.
Chioma has been working as a freelance web developer, earning an average of ₦200,000 per month. She aspires to buy a house and start her own web development agency in the next ten years. Here’s how a tailored wealth management strategy can benefit her:
To ensure financial stability, Chioma should aim to build an emergency fund equivalent to at least six months’ worth of living expenses. She can start by saving 10% of her monthly income in a high-yield savings account.
Chioma needs to manage any existing debts. If she has loans or other obligations, she should prioritise paying them off while ensuring she maintains her emergency fund.
Given Chioma’s long-term goals, she should consider diversifying her investments. She could allocate a portion of her income to high-growth investment options, such as Nigerian equities and tech startups.
While retirement may seem distant, saving early is crucial. Chioma can contribute to a retirement account and enjoy the benefits of compound interest over the years.
To protect her financial future, Chioma should consider health and life insurance policies. These can provide financial security in case of unexpected events.
The big deal about making good investment decisions?
Nigerian stock market:
Historical data reveals the potential of the Nigerian stock market. Despite fluctuations, it has displayed a consistent upward trend. For instance, the All-Share Index has shown an average annual return of approximately 11% over the past ten years. This suggests that investing in Nigerian equities can be a valuable part of a wealth management strategy.
Tech startup ecosystem:
Nigeria’s tech startup ecosystem is booming. Reports indicate that Nigerian tech startups raised a combined US$2,068,709,445 between 2015 and 2022. The number of startups securing funding has been increasing, with 161 startups raising funds in 2021. Chioma, with her background in technology, can explore investment opportunities in this thriving sector.
Real estate investment can be a lucrative option in Nigeria. Lagos has shown consistent appreciation in property values. Over the last decade, Lagos property values have risen by an average of 9% annually.
By starting to save for retirement early, Chioma can benefit from compound interest. For instance, if she invests ₦100,000 annually with an average annual return of 8%, she could accumulate over ₦5,300,000 after 20 years.
Wealth management tailored to the needs of Millennials and Gen Zs in Nigeria is a strategic and achievable goal.
As we like to say on the streets of Lagos, ‘rich man pikin go think say we dey play’. To conclude our financial adventure through Nigeria’s dynamic landscape, it’s clear that wealth management for Millennials and Gen Z should not just be a choice; it’s a necessity.
The case study we’ve explored and the real-world data we’ve uncovered highlights the immense potential available to the next generation for their financial future. By adopting tailored wealth management strategies, you’re not only securing your prosperity but also contributing to the growth of Nigeria’s vibrant economy.
The importance of investing early, staying informed, and seeking professional guidance cannot be overstated. Wealth management isn’t a dry or tedious task; it’s a thrilling journey that promises financial security, the realisation of dreams, and the power to make a positive impact on our world.
So, smart Millennials and Gen Zs, we need to take the reins of our financial future. We need to embrace the digital age, invest wisely, and make wealth work for us. Whether it’s owning a home, starting a business, or giving back to your community, the possibilities are endless.
Wealth management is your passport to a prosperous, secure, and rewarding future. Start your journey today and unlock the doors to a world of financial opportunities. Your dreams are waiting—let us, at Coronation, make them a reality! Reach out today.