Millennials have had a rough road when it comes to money. Not only did they come of age during the Great Recession, which made jobs scarce and benefits even scarcer, but many saw their parents lose big time in the stock or real estate markets, which scared them off of making their own investments. Still, there's no more time for excuses, because millennials are all grown up and taking on increasing amounts of responsibility. From mortgages and parenthood to caring for aging parents, millennials are facing big financial milestones, whether they're ready or not.
According to Bank of America's Year-End Millennial Snapshot, which analyzed 2015 data from over 3,500 millennials, this young cohort of 20- and early 30-somethings continues to struggle financially: a tough job market, hesitancy to invest and student loans are just a few of the challenges in their way to prosperity. Still, the data suggest they are firmly committed to achieving financial independence one day. About half of millennials said the Great Recession changed the way they think about saving, investing and spending, with 40 percent saying they are more reluctant to invest in the stock market and 36 percent saying they are more hesitant to buy a house.
Yet over 80 percent of millennials are optimistic that they will be able to save and invest more in the future. "There is still a sense of optimism with the millennials. Although they're more hesitant, it's not stopping them. They feel good about the future," says John Jordan, client experience and programs executive for preferred and small business banking at Bank of America.
Many are also getting some big financial assists from their parents, and 46 percent of millennial-supporting parents say they don't plan to stop anytime soon.
A survey by the investment app Acorns of 1,020 millennials found that almost half of those surveyed said they were "treading water" financially or worse and would be in big trouble if they missed a paycheck. Most millennials (85 percent) said they haven't yet invested any money in the stock market, largely because they don't feel comfortable with it. While respondents said they wanted to save more, they found it difficult to do so given the pressures of living expenses and student loans.
"So many millennials are working on a contract basis or as freelancers; they don't have full-time benefits," says Jennifer Barrett, vice president of editorial and founding editor of Grow, a digital magazine published by Acorns and aimed at millennials. "They have to be more proactive ... [and] engage with finances much earlier than with earlier generations. Millennials are on their own in a lot of ways," she says.
That's why forming good money habits is a key part of creating financial stability for the millennial generation, Barrett adds. "We recommend that people get in the habit of investing early on," she says.
That's a message echoed by other millennial financial experts. "The biggest money mistake most people make -- and I know I certainly did -- is simply waiting too long to care," says David Weliver, 34, founder of the millennial finance website Money Under 30. When you're juggling your career, love life and other big issues, it's hard to also find time for your finances.
Here are some steps millennials can take to bring their finances to the next level.
1. Skip the credit card offers.
After college, young people tend to get bombarded with credit card offers, Barrett says, but they're usually better off skipping them. If you take on credit card debt, especially on top of student loan debt, then it's easy to get stuck in a trap of constantly feeling like you're falling behind. "Some millennials are embarrassed by [their debt]; it weighs pretty heavily on them," she adds.
2. Increase your savings whenever you get a raise.
Anytime you experience a windfall -- perhaps you earned a bonus or got a raise -- Barrett suggests putting it directly into your retirement savings. "If you can increase your contribution right away before you have time to even register that you have a raise, that's what really makes the difference," she says.
3. Get comfortable with investing.
Because so many millennials are scared of investing in the stock market (and understandably, since they came of age during the Great Recession), Barrett says it's particularly important to dive in early so long-term savings can outpace inflation. At the same time, though, she adds that it's important to have an emergency fund stashed in a safe spot, like a bank account, so you can cover unexpected expenses without reaching for a credit card.
4. "Stop the bleeding."
That graphic expression is how Weliver describes the need to prioritize. "Make sure you're not going into more debt," he says, adding that you should look for ways to downsize your lifestyle or earn more money (or both). Once you find a way to end the month positive at least a couple hundred dollars, then you can start making choices about saving, investing and paying off debt.
5. Pay off student debt.
Student loans are the albatross that hounds so many millennials; Weliver still remembers the day he made his final payment. Along with the day he realized he had enough in savings to live on for a year if necessary, it was a momentous occasion, and one that reinforced his choice to be more conscious about his spending and money management.
6. Imagine your future.
Considering where you want to be down the road can help you make the right choices today, Weliver adds. While taking out insurance or funding retirement aren't the most exciting investments now, they could save you from financial challenges in the future.
7. Embrace your earning power.
If you're working entry-level jobs or getting by on sporadic freelance work, then it's hard to feel in control of your finances, warns Stefanie O'Connell, 29, author of "The Broke and Beautiful Life," a money guide for millennials, and contributor to the U.S. News Frugal Shopper blog. "Even if you reduce your monthly expenses to zero, you're only saving as much as you were once spending ... I tripled my income in 2015 and it's been absolutely life changing," she says.
O'Connell adds that given today's tough job market, millennials have to show initiative and aggressively pursue higher-earning opportunities. "Take the initiative to show how you contribute to the bottom line. It's hard to argue against a raise when you have the numbers and track record to back it up," she says.
8. Talk to your parents.
With parents still playing such an outsize role in so many millennials' financial lives, Jordan says parents and adult children should each make an effort to have open conversations about money. "Parents should take a proactive approach to shore up their own finances and teach children about responsible saving. Parents don't realize how much of a connection they're going to have; that conversation is really important, and they need to start early," Jordan says. On the flip side, millennials should also prepare to potentially assist their aging parents with money one day. "That's a conversation they really need to start having," he adds.
9. Keep things as simple as possible.
It's easy to feel overwhelmed with the various financial management choices you have, but the bottom line is that you need to save more and spend less to accumulate more wealth, says Erin Lowry, 26, founder of BrokeMillennial.com and contributor to the U.S News My Money blog. "Don't get so aggressive with paying down debt that you completely eliminate savings of any kind. Everyone should have at least $1,000 tucked away in an emergency savings fund," she adds. "The best way to shed the feeling of living on a tight budget is to cut spending while increasing your earning power."
That's exactly what she did: When she first moved to New York City in 2011, she was living paycheck to paycheck with a desirable but low-paying job in the entertainment industry. She picked up shifts at Starbucks, worked as a babysitter in her off-hours and severely limited her spending. Eventually, she created enough of a buffer that she could scale back her extra work (and catch up on sleep).
10. Always look for the next level.
Once you achieve a basic level of comfort with your savings and budgeting efforts, then it's time to tackle the next task. Perhaps it's fully filling your emergency savings fund, investing or opening a retirement account. "Don't get comfortable with your status quo," Lowry says. "Push yourself further by contributing another percent or 5 to your 401(k). Learn more about investing. Most importantly, set financial goals and make them specific."
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