The millennial generation, those born between 1980 and 2000, covers a broad age bracket, currently ranging from 16 to 36 years old. This phase in life tends to be quite pivotal with significant life changes taking place—such as finishing high school, starting jobs, and transitioning to adult responsibilities—often within a short span of time.
Millennials nearer to the upper age limit are typically contemplating major life decisions as they explore their identity beyond their work and family roles. The middle group may be graduating from college, starting their careers, investing in homes, getting married, and considering starting families. All these milestones observed within a single generation group make it somewhat challenging to define precisely who a millennial is. However, a general consensus among experts is that millennials have, broadly speaking, not demonstrated the best financial wisdom.
Here are six common financial challenges linked to millennials:
1. ACCUMULATING DEBT:
With major life changes comes significant expense, often resulting in debt. Expenses like higher education, weddings, home purchases, and car acquisitions usually pile up within a few years. Regrettably, many millennials appear comfortable borrowing money for such requires. They somehow rationalize these debts, regarding some as “good debt” or perceiving others as just a typical progression of life. The assumption for many is that youth affords them adequate time to repay these debts and grow their savings later in life. What they often fail to grasp is that such short-term debt can long-term savings opportunities.
2. LIVING FROM PAYCHECK TO PAYCHECK:
Many millennials have developed an unhealthy pattern of consuming their entire earnings before the next paycheck. Reasons for this can vary, ranging from high levels of debt to underemployment or joblessness. Unfortunately, this hand-to-mouth existence often continues until an unforeseen economic crisis causes further financial hardship, in most cases serving as the wake-up call.
3. LACK OF EMERGENCY FUNDS:
Most millennials lack sufficient backup savings to cater for unforeseen financial expenses. Under such circumstances, they resort to credit cards to manage expenses, thereby sinking deeper into debt. A painful financial emergency often then forces them to appreciate the importance of emergency savings and to review their spending to incorporate some savings.
4. DELAYING RETIREMENT PLANNING:
Youth can make retirement seem far off, but time can fly especially when you’re just starting your career. Starting your retirement savings only after you’ve gotten used to a more substantial paycheck will make the resultant pay cut harder to handle. It’s therefore advisable to start saving for retirement from your first paycheck.
5. BEING UNINSURED OR UNDERINSURED:
Insurance may seem unnecessarily costly and dull, especially when you’re hoping to never claim it. However, it is necessary because life is unpredictable. Starting early when you’re young and healthy is beneficial as premiums rise with age and additional health problems.
6. NEGLECTING CREDIT SCORE:
An earlier discussed problem—debt accumulation—may not only deplete savings but can also damage your credit score. A poor score can result in higher interest rates or even loan denials. A low score can also be due to an absence of credit history.
These are the predominant financial challenges associated with millennials. If you belong to this generation, you may want to determine whether you face the same issues. Do you believe these challenges are exclusive to millennials? Can you identify other common financial challenges associated with millennials?
Source: SmartAsset.com
