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5 Reasons Millennials Struggle With Money

Young woman staring at piggybank
Photo by luxstorm on Pixabay

Us millennials often get a very bad rep. We’ve been accused of killing almost everything including napkins, cereal, yogurt, soap, department stores, beer, and even sex. However, there’s one thing we should be worried about killing – our bank accounts.

A recent GOBankingRates survey polled over 2,000 Americans and found that 64% of them aren't prepared for retirement. Younger generations are especially unprepared as 63% of those between 18 and 14 and 53.6% of those between 25 and 34 have $0 in retirement savings.

Over 50% of people between 18 and 34 have $0 in their retirement account.
Source: GOBankingRates

Perhaps it’s no surprise that Bank of America’s 2018 winter report found that 64% of millennials (defined as ages 23-37) think our generation is terrible at managing money and 73% think our generation spends too much. One study went so far as to say that a third of millennials have PTSD-like stress from finances.

With information like that, how can anyone blame us for killing luxury cruises, casinos, designer handbags, or diamonds? (Good riddance as far as the diamond industry goes.)

The Economist tweets "Why aren't millennials buying diamonds?" A millennial replies, "I work at a grocery store."
Source: Twitter

So, what’s going on with our generation? Is it that we spend too much on avocado toast or that we don’t like banks? I’d say it goes a bit deeper than that. We face a set of different crises that hamper their financial health.


Over 44 million Americans owe $1.4 trillion in student loans, which is $620 billion more than Americans owe in credit card debt. The average 2016 graduate owes $37,172 in student loans and will spend $351 a month paying it off. Most workers will take 12 years to fully recover from the burden of paying for their college degree.

A Wells Fargo survey of over 1,600 millennials found that 40% of us are "overwhelmed" by debt and that 47% of them spend more than half of their monthly wages paying them off. The combination of medical, school, mortgage, and auto costs all add up to hefty amounts.

College Degrees

Millennials are more likely to earn a Bachelor’s degree than any previous generation. While the education rate remains high, so do the student loans which take a hefty toll out of our paychecks.

However, the cost of earning a Bachelor’s degree is nothing compared to the cost of not earning one. Data from Pew Research Center shows that household incomes for those with less than a Bachelor’s degree have steadily declined since 1984, while those with a Bachelor’s degree and higher have increased. Those with a Bachelor’s degree earn $2,391 more each month compared to those with just an Associate's degree. The gap is even wider for those with a Master's, professional, or doctorate.

Earnings have been declining for education levels below Bachelor's since 1984
Source: Pew Research Center, 2014

"Today a young adult needs a college degree to reach earnings that are equivalent to what an individual could earn without any college degree in 1989, federal data show," according to Gail MarksJarvis of the Chicago Tribune.


Most millennials entered the workforce just after the economy began recovering from the Great Recession. A study by millennial advocacy group Young Invincibles found that our generation’s average incomes are 20% lower than what baby boomers earned at a similar age.

"Incomes earned early in one's career often set the stage for lifetime earnings," said Young Invincibles deputy director of policy and research Tom Allison. "When you start from a lower rung, it's harder to negotiate a higher salary."

The average millennial earns $684 a week or $35,592 a year, according to data from SmartAsset and the Bureau of Labor Statistics. This information means that most of us won't be able to pay off student loans until at least a full year of working.

Add this to a wage stagnation that’s been going on since before the 1980s. Looking at data from nearly four decades ago, middle-wage workers have only seen a 6% increase while low-wage workers have seen a 5% decrease. The top 1% has seen a 138% increase in wages, while the bottom 90% have only seen a modest 15% growth.

Since 1979, the wages for the top 1% grew 138% and wages for the bottom 90% grew 15%
Source: Economic Policy Institute

Rising Home Prices

It’s more than just avocado toast preventing millennials from buying homes. The median price for a house in the U.S. is nearly $200,000, according to Zillow. In 1940, that number was under $3,000. Even when adjusted for inflation, the price would still be a very modest $30,600. Housing prices increased at a faster rate than inflation, making it difficult for young adults to make a purchase.

About a fifth of millennials still live with their parents, and most have been doing so for at least a year. This trend is most common among those with lower education levels. Even those who have left the nest still struggle as 29% have their parents help with rent and mortgage, according to a Harris poll.

Things are especially bad in San Francisco and New York where median monthly rent costs over $3,000. That's more than $1,000 higher than Boston, which has the third most

expensive rent in the U.S. No wonder almost a third of young adults in the Bay Area still live with their parents.  

Unemployment and Underemployment

In 2016, 12.8% of millennials were unemployed while the national unemployment average was a little under 5%. We often trouble finding jobs despite being the most well-educated generation. It’s an unfortunate numbers game – a job posting regularly receives 250 applications and only 2% of them lead to an interview.

Many graduates who find a job still struggle with underemployment – a phenomenon which describes being over-educated for the position. In fact, 60% of graduates take positions irrelevant to their degree. Those who majored in fields like psychology, political science, theater, or liberal arts end up working in entry-level jobs. Almost half of job seekers have at least an Associate's degree, yet only 27% of jobs require that level of education. 


Despite such dismal news, some things are looking up for millennials. The Bank of America report found that:

  • 67% of millennials stick to their savings goals

  • 73% of millennials stick to their budget

  • 47% of millennials have $15,000 or more in savings

  • 16% of millennials have $100,000 or more in savings

It’s clear that our money problems don’t stem from laziness or narcissism. We’re earning more degrees than previous generations. We’re willing to stay with a company for a decade if it has growth opportunities and raises. A third of us work side jobs for extra income. Plus, according to Dave Ramsey, we are on par or better equipped for retirement when compared to earlier generations.

The most important thing to do now is to develop personal finance skills. Learn about investing, saving, and advancing your career. Build your nest egg now so that you’ll rest easy in your later years. The sooner you start developing good habits, the better off you’ll be decades down the line.

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