With millennials poised to surpass Baby Boomers to become America’s largest generation, the entire landscape is changing. The culture, values and goals held by millennials are not necessarily aligned with those of older generations and therefore, the same traditional solutions used in the past no longer apply. College students are beginning their careers with an ever-growing mountain of student and consumer debt while saving less than their parents did and facing increasing challenges to home ownership today. In fact, one in four millennials are constantly stressed about money as found in the Winter 2018 Better Money Habits Millennials Report. With that in mind, here are three useful financial lessons millennials should be implementing today.
Separate The Necessary From The Unnecessary
Sixty-three percent of millennials believe their generation overspends. A key element is this issue? Separating necessary purchases from impulse buys and wants. Approximately 90 percent of millennials impulse buy, leading to increased spending and driving the worry of not saving enough or not having enough income. It is important to note that their consumption pattern is different; the younger generation is purchasing and valuing different items to their parents.
The high rates of impulse shopping and increased spending means less disposable income to save for their future. In fact, over 50 percent of Americans have less than $1,000 in their savings account. The availability of credit also poses a dilemma for young spenders. The ease of access can be tempting to use, increasing the debt pressure. Learning to take a minute and ask the simple question of ‘ Do I need this?’ can end up cutting spending by hundreds, leaving millennials in better shape to plan for home ownership, family and retirement planning.
Use Those Tech Savvy Skills For Financial Literacy
A defining element of the millennial generation is that it is tech-savvy and embraces the digital age. However, the idea does not seem to apply to financial literacy sadly with approximately 24 percent displaying basic financial knowledge. Between juggling work, repayment of debt and increasing active lives, younger Americans still seem to lack financial skills that can be incredibly beneficial for them.
The solution? Combine the two. There is a growing market of financial literacy applications and websites online that you as a younger adult can utilize that can help you achieve your financial goals and understand what each element entails. A shocking amount of millennials are choosing interest heavy payday loans and seem to be uninformed about options for saving on their student payments and other debt. Platforms for budgeting, comparison of loans rates and even investing on the go are all widely available and fit into your lifestyle. Make use of them and track your spending, savings and your retirement progress within minutes on your phone.
Make The Investment Into Your Retirement
Another key lesson is planning for retirement earlier than traditionally done. Starting to think of your retirement plans in your 20s when just beginning your career, means you can spread your saving and you get more time to work towards your goals. With more millennial favouring experiences and a travel-oriented retirement plan, thinking long term and taking advantage of the tax-free accounts available can make a difference in the end. One in four millennials is worried about running out of money in retirement.
It is becoming more important than ever to have a financial plan and to have one early. One common mistake most people are making is to wait until they have repaid their debts to start saving for their future. However, it is wiser to begin the process as soon as you can cut out a dedicated amount of extra income each month. By squirrelling away in a retirement account, your savings will be gaining interest earning you money until it is time to be used.