Millennial money challenges are quite unique since it deals with the financial challenges of a different generation. To properly define what a millennial is, Pew Research shares that millennials are people born between the years of 1981 to 1996. These people have a unique background growing up having experienced stark contrast in the way people live.
The older millennials experienced playing long hours outside the house versus children nowadays glued to their gadgets at home. This is also the generation that experienced the invention of telephone landlines slowly transition into mobile phones. In terms of finances, millennials have also seen a lot of ups and downs especially the 2008 recession.
This makes millennial money challenges a bit unique and diverse. Life was so simple back then where college was not as expensive as it is today. Finding a job for their parents usually meant staying in one company up until they retire. Bank transactions meant having to physically visit the branch and line up every time.
As great as technology is at present, millennials still come face to face with some financial challenges they need to overcome. Yes, you can easily conduct financial transactions from a smartphone on your hands but that is not enough. You need to make sure that you are able to make the most of what technology has given you to help you strengthen your finances.
The mystery of high-yield savings accounts
There are a number of millennial money challenges this generation faces and one of them is coming in terms with high-yield savings accounts. From the time they were small, their parents have inculcated the value of saving money for the future. They might have even started with a piggy bank where they put money in and break it only when they need the money they saved up.
This could partly be the reason why a lot of millennials are content in putting their money in a modern-day piggy bank – a regular savings account. The reason it is similar to piggy banks is that it earns a measly amount on the interest rate. It keeps your money safe in the bank and they lend it to other people but you earn so little.
A simple shift into a high-yield savings account can immediately transform your money into a hardworking financial instrument. Even if you let your money grow over time in this type of fund, you get more than what you would receive in a regular savings account. Business Insider even shares that you will already be doing better than 75% of Americans if you put your money in a high-yield account.
Creating a budget
One of the millennial money challenges the generation also faces is creating a household budget to follow. CNBC shares that in 2018, 86% of millennials spent more money over the holidays than they wanted to. Trying to stick to a budget or even having one in the first place can be a daunting task for a generation who is trying to accomplish a lot of things all at the same time.
The idea is to set aside a specific day in a week or time in your busy day to attend to your budget. The first step is creating a budget and you need to focus on this part. This is normally a two-step process where you list down your income on one side and your expenses on the other. The idea is to make sure that your income can cover your expenses and more.
After creating a budget, the next challenge is to follow the budget. This might sound like a natural step to take but there are people who fail at this task. Some choose to just forget about their budget when faced with a purchase they want. Others are content to just try and mentally remember their budget and fail miserably leading them to debt.
Staying on top of credit scores
There are a number of millennial money challenges this generation has to address including strengthening their finances. This has a lot of facets including credit scores and making sure they are in tip-top shape. One of the ways to do this is to check up on it regularly to help guide your financial actions.
The FTC shares that you can have a free copy of your credit report every 12 months from 3 credit reporting agencies. This means that staying on top of your reports and know where you need to make adjustments as you go along. If you notice that your score is dipping, look at your report and identify what you can do to rectify the situation.
If you have been making late payments, make sure that you pay your lenders on time. Debt consolidation can be a big help in making sure you get to stay on top of your payments. Having the ability to combine and focus on just one payment gives you the upper hand in making sure that you never forget a payment.
One of the millennial money challenges they will go through very early on in their career is planning for retirement. The biggest hurdle is actually trying to connect the need to plan for a part of their life which will happen at least three decades into the future. Young as they are, a need that far out might not rank that high up in their priority list.
Millennials might be too focused on paying down their student loan debt they used up to get through higher education. It is also possible that most of them are trying their best to gain some traction in their careers. They are focused more on climbing up the corporate ladder and might put retirement planning on hold until such time they are already earning a lot from their career.
The idea with retirement planning is that the sooner you begin saving up for it, the bigger the chances you can retire when you want to. Compound interest can help you increase your nest egg for the future. If your employer also has a matching program for your 401k, you might want to max out your contribution. This is free money on the table being offered by your employer to help you increase your retirement money.
The challenges now are different from before
Millennials need to acknowledge the fact that the financial challenges of people that have come before them can be a lot different from their own. There can be similarities but the landscape nowadays has vastly changed from what people had in the past. This makes goal setting and even working towards those goals a lot different.
Take career growth for example where people in the past usually stayed with one company all throughout their working years. Not only did this make retirement planning straightforward, but it also means that moving up the ladder in the company can be a lot easier. People nowadays jump from one company to the other just to try and get ahead.
The way people invest and save their money is a lot different today since technology has made it a lot more convenient. You can easily transfer money around and even pay your bills as well as put money on investments without visiting your bank. A smartphone can help you do all those and more.
There are a lot of millennial money challenges you need to address if you belong to this generation but it is not a hopeless case. For each challenge, there is a way to get through it but you need to be committed to it. There will be times where you would have to make a few changes in your habits and at times, create new habits to help you reach overcome challenges.