Millennials have been misrepresented as a spoiled generation that spends frivolously because they live by the motto “YOLO”, which according to statistics isn’t quite true. Born between 1981 and 1996, millennials now represent half of the workforce and for every three dollars spent, one belongs to a millennial. Millennials are nowadays a large and diverse group that is economically important.
It is, however, true that millennials manage and spend money differently than their parents and most of it comes as a result of the new financial burdens they have to face. There is a very different reality about millennials managing their money than what you might think and we want to cover some of the things that affect the financial patterns of millennials.
Either you are looking for some budgeting or money management tips for millennials or you want to know more about the spending and saving habits of millennials, this article is for you. Here is what you need to know about millennials and money.
Millennials spending habits
In spite of the stereotypes revolving around millennials spending habits, they in fact have to deal with new financial pressures that previous generations didn’t face before them. Data shows that millennials tend to spend more on public transport and private health insurances compared to the generations before them. Also, when it comes to housing there are home buying behaviors that differ from one generation to another.
When it comes to spending habits, millennials have a tendency to spend more on non-essential purchases such as luxuries and dining out. More than half of millennials admit that they dine out with friends three or more times a week and they also eat take out more often than the previous generations. In many industries, and especially in real estate, social media can be an effective tool however, it can also impact the spending habits of millennials.
Adults admit that their spending habits are highly impacted by social media and the fear of missing out is pushing more millennials to live beyond their means. Financial analysts might suggest that the impulse to spend might come as a result of their financial lives being in disarray. In spite of overspending, about 36% of millennials claim financial stability. However, millennials tend to be more concerned about their spending habits because of the financial burdens that previous generations didn’t have to face.
Financial burdens millennials have to face
Some of these burdens come from education, housing, and the job market. In 1970 the baby boomers generation could buy a house for around five times the average household income. Generation X could get a home for about six times the average household income and nowadays millennials have to pay almost eight times the average household income. However, the buying power lies with the millennials, therefore are the millennials a good or bad sign for the real estate market? One thing is for sure and that is the fact that increasing home mortgages go in tandem with the debt burden of student loans.
In many countries, baby boomers enjoyed free university education and by contrast, university graduates from generation X in the US had already started acquiring debt from student loans after graduating from college. For millennials, the substantial education loan is one of the main reasons that is detering them to delay homeownership or from buying vehicles as you might expect. Within one American generation, student debt has doubled. That is why millennials choose to use public means of transportation when they move out of their parent’s homes or have a conveniently close location to work and school so they can walk.
Millennials also have difficulties in finding enough work to pay the bills and surveys show that millennials are pessimistic about business and the economy. The unemployment rates are higher than a decade ago amongst millennials and it is another sign showing that the job market is a lot harsher nowadays.
Millennials saving habits
Considering those aspects, millennials should be more reserved towards spending money and more focused on saving. Because education and housing come at a higher cost nowadays compared to forty years ago, millennials need to have better saving habits in order to cover these needs.
The fast advancement in technology got us to the point where real estate deals can be closed from a distance using virtual tech, therefore millennials used some of the modern technological tools to their advantage. By harnessing new technology, millennials are able to manage their finances closely through online tools to track their spendings. About 1 in 3 millennials leverage these online tools for money management and about 7% use budgeting apps.
When it comes to millennials and money, research amongst the Australian population shows that about 70% of millennials research on the go before they spend compared to only 28% of the previous generation. Another interesting fact that has been researched about millennials in relation to money is the fact that they are turning away from credit cards.
The percentage of millennials turning away from credit cards has fallen from 57% to about 49% in the past 14 years. This shows that millennials are less likely to own a credit card compared to the older. However, the fear of missing out is still real when it comes to millennials and money. Also, we see that many use money as an emotional tool and this affects their saving habits.
Budgeting for millennials
Many millennials feel like they will never be able to achieve their materialistic goals such as buying a house, getting their dream job, or retiring early. After all, there are 2 socio-economic forces that shape this generation and those are the Great Recession and the student loan crisis. Although some cities are more vulnerable to recession than others, many millennials were left out of work and are still struggling to recover.
Paying off student loans has become increasingly difficult especially for those struggling with unemployment. Also, a survey done by the AICPA (American Institute of Certified Public Accountants) shows that the vast majority of millennials want to keep up with their friends in terms of their possessions. About 25% of millennials have late payments and a little over half are still being financially aided by their parents.
For many millennials, financial stability is just being able to pay the bills each month and this is a disturbing truth. There are also studies showing that millennials have different money habits between genders, such as men being more inclined to keep up with friends while women tend to be more frugal and save more.
With that in mind, it is crucial that you start budgeting as a millennial and improve your financial situation by having better money management skills and being aware of your spending habits. Budgeting for millennials can be made simple and that is what we are aiming to do, therefore here are a couple of tips.
Track your spending habits
Tracking your spending habits is probably one of the best things you can do as a millennial in order to keep your spendings and your savings in check. Spending less than you earn or thinking about ways to earn more is the key to financial stability. Carry an audit of your expenses. Keep track of your spending habits and see what needs adjustments. See if you can take out things you don’t need or start looking for ways to manage your housing expenses in order to save money on rent or even organize on a budget.
Consistently put money into your savings account
Consistently put money into your savings account. As soon as you get your paycheck or money from any other source such as passive income, don’t forget to save first and then focus on your expenses. Ensure that about 10% to 20% of the amount you earn goes to your savings account in a consistent manner. Create a habit, and soon enough you will have thousands in your savings account
Investing is probably one of the most important things to consider as a millennial. Saving money in order to spend it on liabilities such as vacations, cars, clothes, and gadgets isn’t going to help you in any way. That is why investing is the next big thing that is going to help you boost your way to financial stability. It can be an investment in yourself by taking a course, getting a degree, and in the end, get a better-paid job. You can invest in the stock market or seek out some of the best cities for real estate investments. Whatever it might be, don’t forget to invest.
Build a side hustle
Building a side hustle is the next great thing for a generation that has suffered most from recessions and unemployment. The internet is nowadays one of the most accessible tools and building a side hustle is easier to do nowadays. Marketing your skills online, thanks to technology is a great way to promote yourself and by having a secondary stream of income you can save more money.
The hardships of the past have created an interesting love, hate relationship between millennials and money. However, relationships are reserved between people, money is just a tool that can be used to make things easier for everyone who chooses to manage it properly. Millennials have been pushed by their environment to be more creative with their careers, earning, and ultimately with their own lives. By learning from the saving culture of the previous generation, the future could turn out better than we might imagine.
Do you agree with our tips on how to save money as a millennial? What do you think is the key to financial stability? Let us know in the comment section below. Also, if you love our content don’t hesitate to share it with your friends on your social media accounts.