Financial Obstacles Facing Millennials
Entering adulthood can seem like a daunting task but with the rapid expansion of technology and ultra-competitive labor market, the Millennial generation has huge obstacles to overcome compared to generations past. Certainly, each generation has their own unique situations, but those situations continue to increase with globalization.
Millennials are choosing to marry later in life and prioritizing renting over home ownership due to the rising cost of living and oppressive student loan debt. This combination is leading to the postponing of retirement saving and while the recession taught this generation some lessons in finance, it still has become difficult progress.
What specifically is holding Millennials back? Here are 4 data points to consider in this new generation.
Financial Constraints
One of the main reasons Millennials are conservative, whether by force or choice, are their financial constraints. Most of the generation stated they lack the money to put towards retirement and furthermore, over half are living paycheck to paycheck. While they realize the earlier you save the better, it simply isn’t in the equation.
Taking it a step further, many Millennials believe that Social Security will cease to exist or play a small role during retirement. This means the Millennial generation will have to account for additional income that was once subsidized by the government. While many from this generation understand the financial implications of postponing certain financial milestones, it simply can’t be done at this moment.
Debt
Secondly and already alluded to earlier is the increasing debt Millennials have obtained through various avenues, with the biggest culprit being the high cost of education. Debt is the killer of not only cash flow but wealth building as well. This combination has a huge negative impact on the financial health of many in this generation. With the promise quality jobs, the market has shifted and become oversaturated with educated individuals, leading to a decrease in wages.
Beyond student loans, consumer debts such as a mortgage or credit cards are among the top debts constraining the ability of this generation to save. These debts combined indicate a significant portion of Millennial’s income goes directly to paying off debt, causing a lack of investing and saving for the future.
Lack of Confidence
All these negative pressures on personal finance is causing a lack of confidence in the economy, job market and the overall economic environment. With the recession in 2007-08, it’s caused individuals to become hesitant to invest their money with fears it might get wiped away. Over half the Millennial generation stated that the stock market was not the best place to invest.
However, for those that do choose to invest in the market they are being conservative compared to their current age. Someone early in life should be taking on more risk to increase returns but instead are opting to play it safe in fear of another market collapse.
Lack of Market Knowledge
Lastly, the lack of market knowledge is hindering the ability of the Millennial generation to invest. Investing and personal finance isn’t talked about in many schools and this is causing issues with basic investing knowledge. One of the common threads among the generation is the purchasing and selling off stocks too quickly when really, they should be holding them for longer periods of time.
The net worth of individuals between the ages of 29 and 34 years of age continues to decrease with time. In 2007 the average net worth was $39,635, but that has since decreased in 2013 to $18,400.
Are all Millennials created equal? The answer is no, and this generation continues to face a challenging labor market and high costs of education. While every generation has their unique issues, Millennials continue to face an onslaught of financial problems that could have a greater impact on the overall economy.
JosephLaforte 