Millennials are the now the largest generation in our population, surpassing 75.4 million in America. They remain the most educated and diverse generation in our workforce.
With rising college tuition and costs of living and employment wages failing to keep up pace, America’s 18-34 year olds are changing the way they approach their personal finance decisions including their college financing and saving habits. So how are they changing the way Baby Boomers did savings and finance? Take a look at these three surprising ways.
Proactive About Savings
Millennials are planning ahead early and not just for that new car or first home. Over 50 percent of young adults are increasing their retirement contributions in their workplace retirement schemes and also investing in personal portfolios to boost their retirement funds.
In addition a Bankrate survey found that millennials are saving a bigger chunk of their paycheck than Baby Boomers; approximately 6-10 percent of it. At this rate, they are expected to retire much more comfortable than Baby Boomers.
In fact millennial parents are set to retire $1 million richer than Boomer parents. So even though the younger generation is facing tougher and higher cost of living and are paying 15 percent more in bills than others do, there are a subsection of them that are making saving a priority.
Financial Plan in Place And Its Not Necessarily Retirement
Much has been said about the spending habits of millennials and the fact that most of them do not embrace budgeting. However, they certainly are creating and pursuing financial goals for themselves.
Over 38 percent of the younger adults have a monthly savings goal and 34 percent of them have a written financial plan. Those numbers are halved when it comes to Baby Boomers.
In addition millennials are taking advantage of the financial resources available to them with almost three quarters of them having professional help in creating their financial plans.
What is interesting is that while they are saving, their saving goals are slightly changed from Baby Boomers and Gen X. Their ideas of financial freedom are not necessarily linked to saving a great retirement nest egg.
In fact, less millennials are looking to follow the older generations routine of getting married, having children and then retiring. So what does their financial future look like? Well it includes travel, adventure and dining.
College Costs Affecting Home Ownership
More and more millennials are moving back home with their parents after graduating from college. Almost 80 percent of millennials desire owning a home but yet home ownership remains a distant possibility for them. At the age 25-34 which would be referred to as prime home ownership age, many millennials are struggling with the burden of student loans and of course, their changed priorities. As a result, over 40 percent of them have nothing saved towards a downpayment and are buying getting on the property ladder later. In addition the rising house prices and 20 percent required deposit continue to put a damper on the home ownership dreams of millennials. Home ownership amongst millennials stands at 41 percent, half of the Baby Boomers rate.
The average millennial student graduated with over $39,000 in student loans and the federal student loan debt has surpassed $1.4 trillion. In 1976, college tuition was priced at $10,000 inflated to today’s rate.
More than a third of millennials graduate with over $30,000 in student debt and spend an average of 21 years repaying that debt. The generation also does not understand their student loans.
A Citizens Bank survey found that 44 percent of graduates did not know the difference between federal and private loans. However, with the generation being savvy technologically, they are researching much more than their older generations on their credit options to find loan options to pay for school. One thing that stands out is that young adults are opting for other credit products such as personal loans instead of credit cards.
As a result of rising student costs, 41 percent of these graduates will be putting off buying a home beyond their 30s due to the burden of student debt. They are also relying more on financial help to get on the property ladder with over 50 percent of them getting assistance from home loans and family and friends. Even with their saving habits, the housing market continues to rise out of their grasp.
It is clear that millennials are transforming the global economy and lifestyle right before our eyes. From the way businesses operate to lifestyle choices and now their approach to personal finance, the younger generation is redefining it all.