The story isn’t as dire as it seems. There are many Millennials who are financially savvy. A survey released by Bank of America found that one in six Millennials have over $100,000 saved. Although $100,000 in savings is great, only a minority of this generation is saving.
Why is it so Difficult for Millennials to Save?
Overall, Millennials have more difficulty saving than other generations. Some people think this is because they face a set of challenges that their parents didn’t. Some of the things impacting Millennials’ saving are:
1. The Rising Cost of Education
Millennials are the most highly educated generation in the United States. The only problem is that the cost of education has skyrocketed. Student loan debt is at an all-time height. Research shows the cost of tuition has more than tripled over the past four decades. Because of this, Millennials carry more student loan debt than their parents. The average student loan debt is $37,172. Repaying this overwhelming debt makes it difficult for Millennials to save.
2. Increasing Credit Card Debt
It is easier now than ever to get a credit card. Whether it’s due to an emergency or impulse spending, it’s easy to accrue huge amounts of credit card debt. Paying this debt can be difficult, especially with rising interest rates. It may be tempting to put off saving to try and get ahead on paying off these debts.
3. Stagnant Wages
Cost of living has gone up. To make things worse, wages have stagnated over the past three decades. Research shows hourly wages have grown by a measly 9% in the past 30 years. Although Millennials are highly educated, many are underemployed. This leaves them with little opportunity to make more money. Couple that with immense student loan debt, and it makes it even harder to save!
4. The Decreased Pension Rate
Many people from past generations enjoyed robust pension plans from their employers. Millennials are missing out on these plans since many companies have gotten rid of then. This can make saving for retirement more difficult (although there are other options).
Research shows that, only 14% of workers in the private sector receive pensions. Pensions made it easier for older generations to save money. The fact that fewer employers are offering this option is a big blow to the saving habits of Millennials.
5. Lack of Financial Understanding
Unfortunately, most millennials don’t know what it takes to accumulate wealth. That may be because they don’t have any financial education. Some of the things millennials don’t know about money include:
- How to dispense with debt: some don’t even know they are in debt. A survey found that 28% of students don’t realize they have student loan debt. They just thought they got financial aid because they qualified for it. They didn’t realize they had loans that were accruing interest.
- How to handle bills: Millennials live in a digital age where almost everything is done electronically. Unfortunately, Millennials don”t always plan for these bills. As such, these bills can end up being past due and negatively impact their credit.
- How to renegotiate terms: most Millennials take bills and costs at face value. In many cases, they end up paying way more than they would have had they renegotiated their rates.
These are just a few of the things that make it difficult for Millennials to save. There is still hope though. If Millennials take the time to educate themselves on finances and work to save, then it is possible to build up an emergency fund or retirement portfolio. There are apps that can help invest and budget, as well as financial advisors who can direct you on coming up with a savings plan.