Millennials should be concerned about their personal finances. After all, they are poised to be a huge influence in the economy for the next few decades. The Baby Boomers are taking the backstage as they go into retirement while the Gen Xers, although they are still running things, will slowly give up their power as the Millennials continue to grow. It is a fact that the most educated generation holds a lot of potential for our economy.
But what exactly are their thoughts about their own financial situation?
Here is a video created by Bloomberg Business that showcases the opinion of Millennials about their personal finances. The respondents were asked a series of questions that displayed just how confident they were when it came to their financial situation.
As you can see, Millennials are generally worried about their finances because of their debts. But you can also see that behind their doubts is a confidence that is brought about by their educational background. Then again, this education is the reason why a lot of Millennials are in a lot of financial troubles.
According to the report from the site WhiteHouse, the outstanding debt of Millennials is currently at $1 trillion by the end of Q2 of 2014. This is currently the second biggest debt category in the country – after mortgages. Student loans are quite a serious financial hurdle for this generation to overcome. Although some studies have stated that this debt is not the cause of their delayed homeownership, most of the Millennials have stated that their student loans are causing them a lot of stress.
When you first think about Millennials and their personal finances, the more prominent issue that they have involves student loans. This makes their financial situation seemingly bleak and problematic. But despite this immediate assumption, the finances of this generation is actually better than what we were led to believe.
Millennial’s financial well-being are better than we thought
If you thought that Millennials need financial advice – you may be right. But it may be different from what you think they need. Their finances are actually in good shape. Not only that, they seem to be on top of their personal finances.
We all worried about the future of this country because we thought that the generation poised to take over is in deep financial trouble. After all, their student loan debt is a very serious matter. If they are saddled with debt, how can they invest to grow their financial worth? One of the first to be sacrificed when you have debt is your investments. If you have extra money after your debt payments and emergency fund, that is when you will invest. You will also curb your spending. 70% of our economy is driven by consumer spending. If the Millennials will grow up to have very restricted spending habits, what will happen to our economy?
These should be enough reason for us to be concerned about the personal finances of Millennials.
The data coming from Navient.com revealed the state of the finances of Millennials and fortunately, prospects appear to be good. The latest survey entitled “Money Under 35” showed the financial position of those between the ages 22 and 35.
The finding reveals the following truths about the personal finances of Millennials.
- 9 out of 10 Millennials are saving their money.
- Almost 2 out of 10 are prioritizing their emergency fund.
- 6 out of 10 know their credit score.
- Although majority have student loans, were just as likely to borrow a home loan as those who did not have any college debt.
- The amount of student loan debt that they owe is proportionate to their educational background. It also determines their ability to pay back their student loans. Those having the most trouble in repayment are those who failed to get their degrees or have associate degrees. Those with higher educational attainments are less likely to report that they are having troubles meeting their repayment plans.
- Men tend to earn more than women. Depending on the field of study, the income difference can be as low as 5% or as high as 53%.
- More men have student loans, but women are more likely to have other forms of debt like credit card debt, auto loans, and mortgage.
The overall findings from this survey is that Millennials are doing a lot better than we first imagined. Navient analyzed the financial health of Millennials and 83% of them have healthy finances. In fact, 20% are analyzed to have excellent financial health. It is observed that those who are educated are more likely to be in better financial health than those who do not have degrees.
Through this report, you can see just how conflicting the data have been when it comes to the personal finances of Millennials. While it is true that student loans are compromising their financial future, it is also evident that the education that they got because of that loan helps in the repayment.
Apart from the truth that this generation is not as financially distressed, you can also see that debt can bring about something positive.
Tips for Millennials who want to maximize their financial growth
While it appears that Millennials are more in control of their personal finances, that does not mean they are above getting some sound financial advice. Here are a couple of tips that they should look into to help them improve their financial position further.
Start saving for retirement.
Saving for your future is never a bad thing. After all, this is something that you will benefit and nobody else. You have to understand that saving early for retirement will not only secure your future but will also make the task easier. When you start contributing towards your retirement fund early, you are not required to make a big monthly contribution. A study published on CNBC.com, Millennials have reportedly set unrealistic retirement goals. Some of them think that they only need $36,000 a year to survive. This conclusion may be premature because you need to take into consideration the inflation rate and how it will make the cost of living rise by the time the Millennials retire. The unrealistic goals may be their way of justifying postponing their retirement contributions.
Pay off your student loans aggressively.
Although we mentioned that student loans help Millennials earn more, it is still something that they should take seriously. Pay it off as soon as you can. If possible, live a frugal life so you can increase the monthly contributions towards your student loans. The more you contribute towards your loans, the faster you can pay it off. This will help you save on the interest in the long run.
Save up for your emergency fund.
Another thing that you need to work on is your emergency fund. You need to prepare for the unexpected expenses. You may feel like you are invincible at the moment because of your youth, but that will not last long. Soon you will realize just how fragile your situation can be. The only way that you can make your finances secure is by building up your emergency funds. This will allow you to avoid debt. When something unexpected happens, you do not have to borrow money to get yourself out of it.
Invest your money.
Finally, you want to use a portion of your money for investments. Your savings may keep you secure, but it is not enough to grow your personal finances. You need to put some of your money in investments so it can earn you more money. The gains from investments will be much more compared to the interest that your savings will ever get you. If your finances are not enough, you can concentrate on your emergency funds first but after having an adequate amount, you need to start investing immediately. Take note that this should be separate from your retirement funds.
