Millennials Face Financial Hurdles, But There’s Hope

Why It Matters

• According to the Sightlines Project from the Stanford Center on Longevity, 2/3 of Millennials ages 25-34 are in debt.

• The study also shows student loan debt is on the rise.

• Early financial action is a necessary step to building a secure financial future.

Andy Bartosch tkc.profilePicture Written by: Andy Bartosch | Transamerica
05/29/2017

3-4 Min readClock Icon

While Millennials are getting buzz all around the internet, they’re also facing increasingly difficult financial situations, according to the Stanford Center on Longevity.

Could this be the first generation to do worse financially than their parents? We all hope the answer is no, but the truth is, they may need some help to get there.

The Millennial situation

The Stanford Center on Longevity’s Sightlines Project shows two-thirds of Millennials are in debt. Nearly a third of Americans under 35 carry debt that’s more than 20% of their household income, and more than a quarter carry debt that exceeds 30% of their income.

Of Millennials who have graduated from college, student debt is up 500% since 1995, averaging nearly $24,000. But the student debt burden may be even worse. The study found that when excluding those who are not carrying debt—focusing only on those who still owe—the average debt is actually more than $47,000.

Lack of long-term investments

What makes this a problem is that the study found while many young debtors are able to handle the monthly payments, “it may be at the cost of delayed investments such as home purchases or retirement plans.”

The truth is, Millennials have it tough when it comes to home ownership. Less than a third of those between 25 and 34 live in homes they own. That’s down 20% since 2000.

“Declines or even delays in home ownership imply reduced assets for post-retirement years,” the study reported. With the deck stacked against them early in life, preparing for later in life is that much harder.

That can make it tempting for parents of Millennials to step in and lighten the load, but Baby Boomers and Generation X could be risking their own financial security, now and in retirement, if they can’t afford to do so.

The bottom line

“Compared with 15 years ago, fewer Americans are financially secure and fewer are taking the necessary steps to enhance their long-term financial security, spawning dramatic individual and societal implications,” the study concluded. “The youngest adults are faring the worst.”

So what can Millennials – and the older generations who love them – do to reverse this course?

The answer is to start preparing financially as soon as possible.

Millennial financial action plan

• Start immediately. Take a “start yesterday” approach to preparing financially. Putting off until tomorrow exacerbates an already difficult financial outlook.

• Accredited financial professionals can offer guidance on navigating the financial strategy world. People like teachers, bosses, and coworkers may be sources of knowledge too. Find successful people, and then use them to figure out how they got to where they are now.

• If a family member has built a positive money-management relationship with a trusted financial professional, the Millennials in the family may be able to piggyback off this shared financial acuity.

• Find apps that can help you to start saving or investing your money. Acorns allows users to build wealth by investing their spare change.

• If an employer offers retirement plans like a 401(k), take advantage of everything you can. Try to always put in the full amount that the employer will match.

• Look for long-term investments.

Health Factors

Of course, a healthy long-term financial strategy is only as good as the health of its owner. A healthy lifestyle not only supports years of happiness in financial security but in many cases can add to an individual’s personal wealth.

So how are Millennials faring when it comes to living a healthy lifestyle? According to Life Planning in the Age of Longevity: Insights for Millennials from the Stanford Center on Longevity, not well.

While the smoking rate has decreased and amount of exercise has increased compared to other generations, obesity and sedentary behavior are on the rise. Of Millennials, about 42% don’t exercise enough (at least 150 minutes per week). Roughly 40% don’t get enough sleep (seven hours), and almost 75% don’t eat enough fruits and vegetables (five servings per day).

Other factors for holistic happiness

Those Millennials who do lead healthy, risk-averse lives stand a good chance to see the age of 90 or even 100. This sharpens the need for the generation to look for ways to find long-term financial security.

And there are even more factors at play. Millennials may live to an older age than their grandparents or great-grandparents, and they’re going to need to be prepared for that financially.

The Center suggests Millennials combine early financial planning and a healthy lifestyle with high amounts of social engagement to create a stew of good behaviors that will allow them a greater chance at happiness later in life.

Parents and grandparents of Millennials, meanwhile, can strive to be examples for them by making healthy lifestyle and financial choices. Millennials can see a shining example of what it means to be healthy, wealthy and wise, and they’re much more likely to follow suit.

Conclusion

Preparing early, financially, can help turn around the difficult financial situation that faces many Millennials. Especially when paired with a healthy lifestyle and lots of social connectedness. And parents have a huge effect on how Milliennials can get off on the right foot. Want to discuss this topic? Join the conversation at our Savings and Retirement discussion board.

Things to Consider:

• Start preparing financially, early.

• Look for ways to build long-term wealth.

• Combine financial preparation with good health habits and social behaviors.

PHOTO: TWENTY20@SHANNONWITMER

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