Many millennials have found themselves comparing their family’s situation with the one they had growing up. Some might be wondering why — even with both partners gainfully employed — they’re facing more financial hardship than their parents ever did.
Millennial parents want to be able to provide their kids with the same luxuries and ease they had growing up, but find it harder and harder to afford. It’s a widespread phenomenon that might seem hopeless. But, there are ways to move past financial woes and still provide kids with abundance.
Not Being Able To Buy a Home
Older generations might think millennials simply aren’t prioritizing or don’t desire the opportunity to buy a home, but that’s not the case. According to Rocket HQ, 93% of millennials want to own a home someday. The problem is that home prices are historically high — having jumped 118% since 1965. Prices are rising at a much faster rate than wages, which have only risen 15% since 1965, making buying a home an almost impossible feat for millennials’ families.
Millennials are also putting off buying a home to prevent accruing more debt. In October 2021, it was reported that 15 million millennials have student loan debt, with the average debt hovering around $40,000. Buying a home would add to that overall debt, making paying it off even harder.
Not all hope for homeownership is lost, but it does involve being flexible. Perhaps the dream home is no longer on the table, but a home close by can be. Experts recommend looking to more affordable suburbs. For example, the average home price in San Francisco is $1.64 million, however, if you opt for Richmond, a 40-minute drive from San Francisco, the median home price drops down to $810,832.
Millennial homebuyers can also consider a Shared Appreciation Mortgage (SAM). With a SAM, the buyer gets to buy the home with a below market interest rate. The trade-off is that when they sell the house, the lender gets a percentage of the sale. Millennials can also check if their state offers a special interest rate for first-time homebuyers to make buying a home more affordable.
Not Having Much in Savings
Millennials are struggling to put away money for a big purchase or even a rainy day. It’s reported that 58% of millennials have under $5,000 in savings. This is due to the aforementioned student loan debt that is plaguing millennials. Most millennials reported that if they were to receive $1,000 out of nowhere, they’d use it to pay off their debt.
An easy way millennials can start saving is by automating it through their bank. Many banks offer opportunities to instantly take a percentage out of each paycheck and deposit it into a savings account. It’s recommended to put away 5%-10% of income toward savings. Whatever seems like a small amount out of each check will ultimately become a larger amount and in the long run, anything is better than nothing.
Millennials can also opt to send their savings into a Systematic Investment Plan (SIP) to help money grow faster. This takes a determined amount of money out of a checking account regularly, and puts it into the stock market, so the money has a chance to grow exponentially over time. This is a set it and forget it method that can help millennials build wealth.
Not Having a Retirement Account
In 2019, it was reported that 25% of millennials do not have any money saved up for retirement and 9% don’t think they’ll be able to retire at all. Reason being that millennials have a lower wealth-to-income ratio than previous generations. It’s disheartening to hear, but there is definitely still time to build up savings for retirement.
Millennials can start to grow their savings for retirement by investing their 401(k) into the stock market. Even starting from scratch at 30 years old, an investor could have $1 million in savings if their account yielded 9% every year and they invested $370 a month. Additionally, millennials should take advantage of any matching contributions employers offer for 401(k). It’s best to contribute the maximum amount to receive the full benefit of the company match.
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This article originally appeared on GOBankingRates.com: Millennial Parents Face These 3 Financial Obstacles — How Can They Turn It Around