Millennials are often dubbed by the older generations as lazy, spoiled, and lacking money management skills. However, is that really true?
Evidently, there are many financial disconnects between Millennials and their parents, Baby Boomers, and Gen Xers. But these differences are not caused by their spoiled behavior.
The cause is complex but the roots of it lie in the declining economy.
In this article, we’ve narrowed down some of the most important financial disconnects between Millennials and their parents.
Lack of Financial Literacy
People, in general, find money management to be daunting and many fear the words “mortgage” and “investment”. However, Millennials especially seem to struggle with money. Older generations blame them for lacking basic money management skills, for their spending habits, for not thinking about retirement plans, etc.
A 2018 national Financial Capability Study revealed that about a third of Millennials struggle with money because they lack basic knowledge and understanding of finances. The reality is that financial literacy is one of the disconnects between these age groups. A large portion of the youth spends money they don’t have on things they don’t need. Impulse purchases are not uncommon.
However, this doesn’t mean that Millennials aren’t scared for their future. A study showed that 41% of participants were stressing about the money constantly. Faced with debt, inconsistent pay, and the declining economy, it’s no wonder Millennials are so confused and scared.
Many think that better educational programs should be provided to teach Millennials about financial literacy.
High Student Debt
While the older generations are quick to judge Millennials for their spending habits and lack of financial awareness, we must not forget one very important part of the picture: the increasing student debt. Millennials have taken on 300% more student debt than their parents did.
It’s this problem precisely that prevents MIllennials from saving and having a better, financially stable life. When compared to baby Boomers and Gen Xers, Millennials under 35 are 50% more likely to have student loans. What’s more, Millennials might be earning more money than their parents did at the time but the increasing student debt cripples them.
Millennials piled on student debt in line with the saying “get an education and then get a good job”, but the reality turned out differently. A large portion of today’s youth doesn’t have what qualifies as a good job. What’s more, many of them are returning home to live with their parents and depend on them financially.
Decreased Purchasing Power
If we take a look at the spending habits of the older generations, they seem to follow a fixed structure. Get a job, buy a house and a car, save money, and retire. Millennials find that structure hard to follow not because they don’t want to but because their purchasing power is significantly lower.
The fact that the youth of today is largely financially dependent on their parents even though they’re in their late twenties or early thirties doesn’t mean that Millennials don’t have the same financial goals as previous generations. A study conducted by the Federal Reserve confirms it.
Job uncertainty, inconsistent income, high rent…all these factors prevent Millennials from planning their lives and commit to paying off a mortgage. Unable to secure their future, the youth spends money on clothes and small pleasures.
Millennials Will Have to Work Longer
A large number of Millennials have no savings at all. In fact, one of their most common causes of stress is the fact that they are not setting enough money aside. But with high rent and student debt, they can’t start saving early in life.
This means that Millennials and Gen Zers will have to work longer than their parents. A Nerdwallet study reveals that many of us won’t be able to retire by the age of 75. That means that as soon as they graduate, their prospects of a comfortable retirement are already ruined.
However, it is worth mentioning that newer research indicates that a great number of Millennials are starting to save money, especially in the UK. A study conducted by Revolut found that 7 out of 10 young adults are regularly saving money.
Based on the above-mentioned facts, it is easy to conclude that while there are quite a few financial disconnects between Millennials and their parents, it’s important to acknowledge that these differences are a consequence of something much greater than simply the spoiled behavior of the youth.
The most educated generation so far is facing financial uncertainty because the world changed greatly from the time when Baby Boomers and Gen Xers were young adults. The basic prerequisites of a comfortable existence such as job security, housing, and healthcare have become unattainable to them.
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