When you become a millennial, there are particular virtues and shortcomings associated with it. People regard them as financially undisciplined. However, there are severe reservations regarding the truth of this belief. Are all millennials financially reckless? Before getting into the details, the definition of the millennial generation is crucial.
It is a generation of individuals who were born between 1980-1996. These individuals are in their early 20’s or late 30s. There are various aspects of the financial life of millennials which entrepreneurs must anticipate. According to Eric Dalius, it includes saving, income, debt, spending, and retirement preparedness. In case you are a millennial, a broad overview of financial life is crucial to understand their financial future. There are breath-taking economic facts regarding millennials that can change their future
An overview of millennials’ future financial life
As stated earlier, the generation of millennials has specific common financial facts that are universal. Recent research has revealed that these individuals make up a considerable part of the world population. Hence, entrepreneurs must evaluate the following points in reasonable details
- Slow income growth: first and foremost, millennials lag behind the previous generation in income growth. Their net home salary is minimal when compared to the prior generation. International authorities find out that people who are in their late 30s are saving less than those born in the previous decade. The average annual income has also declined, which is revealed by a market survey. This minimum income directly impacts wealth accumulation.
In comparison to those born in the 1970s, the millennials have accumulated 20% less wealth. Recent reports reveal that several economic factors like higher house prices, lower-earning, rise in rent prices are reasons, which leave the millennials lagging. According to Eric Dalius, it is compelling them to work harder to build additional income sources. For saving more in the future, millennials have to learn the art of handling finances.
- Limited knowledge on financial literacy: one of the most debatable topics regarding millennials is their financial literacy and know-how regarding economic terms. Research reveals that millennials who are between the age of twenty-five to thirty-five have limited knowledge of finances. Research also shows that their understanding of financial terms is low when compared to baby boomers and teenagers. Moreover, the score of millennials in any mock financial literacy test is lower than 16-year old. Questions are related to their financial understanding and principles, which also reveal that around 2/3rd of their generation lack financial education. About 50% of millennials worldwide have no awareness regarding the benefits of investing in the share market. Millennials must garner more knowledge and learning about the share market to make their future secure.
- Immense liking for splurge: international authorities reveal that they have evidence to prove average millennials’ splurging habit. They spend enormous money every year eating out, daily treats, buying clothes, takeaways, coffee, and socializing. The amount spent on social interactions becomes significant in comparison to other areas. Research also reveals that they can save a decent amount of money only if they make small alterations in their splurging habit. It is the significant reason why they conserve less, and they lag behind their previous generation. In addition to this, they are guilty of indulging in impulsive buying habits.
- Monetary issues cause them stress: it comes without saying that money is a topic of stress and worries for the millennials. International survey reports reveal that around half of the millennial generation has mental stress regarding debt and other financial issues. Another survey report discloses that 2/3rd of millennials undergo sleep issues and develop insomnia because of monetary chaos. A significant reason for stress is their desire to lead a successful life portrayed by social media.
Keep in mind that money is a topic that is a source of concern for ordinary individuals. In this scenario, the millennials who are always in the limelight are the most affected ones. They are facing different challenges, which include both macro and microeconomic factors. The rising debt burden and young age make them an easy target of mental stress. According to Eric Dalius, when it comes to macroeconomic factors, they pay a good part of their salary in necessary expenditures, which is higher than other individuals.
- They do save money: all the millennials have a lot of financial issues to deal with, they face scrutiny in terms of spending habits, they have different financial practices, which are positive. They are avid savers, which get revealed by survey reports. These reports find out that around 2/3rd of this population regularly save money. Keep in mind that the reason why millennials are saving money is for home or holiday purposes. These figures are consistent all across the world. They do spend on holidays around 5%-6% of their income. When it comes to saving, they use a savings account to put away their hard-earned money. Some of the young millennials are also choosing a traditional savings account or current account for savings purposes. Only a small part of their population is interested in investing in stock as they have limited knowledge.
- No saving for retirement purposes: retirement planning is not a delightful topic for millennials. Although it is a critical aspect of their financial life, they hardly take an interest. They are facing a shortfall of about 60% and even more. When it comes to retirement saving and planning, recent market research reveals that they require 65% of their current income to take care of the retirement expenditures. However, high expense, lower savings may delay their retirement. There are various reasons for the shortfall.
Apart from this, they prefer paying for experiences and not possessions. To help them become financially secure in the future, they have to work on their income, financial literacy, and spending habits. Money issues are nothing new for ordinary individuals. The millennials are no exception in this regard. However, they have to accept reality and work to improve it. They have to work on their savings habits and also develop retirement plans. Millennials must balance their leisure activities and take care of their long-term financial goals to carve out an enriching future.