MILLENNIALS CAN’T WAIT TO WHITE-OUT DEBT
While they sometimes get a bad rap, young people are striving to live within their means
Millennials are not down with being in debt and getting rid of it is one of their top financial priorities, according to the latest USA TODAY/Bank of America Better Money Habits poll.
Nearly two-thirds of those surveyed said that having no debt is a priority, ranking slightly above having minimal financial stress, spending less than they earn and having emergency savings.
Yet more people (20%) consider having savings over being debt-free (13%) as the definition of being “financially fit,” according to the online survey of 1,320 people ages 18 to 34.
The data show a divide in the confidence and habits of college-educated Millennials and those without a degree.
Nearly 60% of those who graduated from college feel somewhat satisfied with their finances. Among those who didn’t graduate, that drops to 40%.
College graduates are also more likely to say their finances are in good or excellent shape. Meanwhile, non-college grads are nearly twice as likely as college grads to spend more than they make (35% vs. 19%).
Although the majority of those polled — 64% — have savings, that share drops to 57% for people who haven’t graduated from college and jumps to 85% for those who did. And despite the burden of student loan debt, college graduates have muchmore financial confidence and satisfaction than those who skipped college or who started but didn’t graduate.
Yet roughly half of Millennials (51%) say they see not making enough money as an obstacle to financial wellness, whether they went to college or not.
Indeed, wage growth has been slow in recent years, growing roughly 2% a year, according to Labor Department figures.
They also have some steep challenges in reaching goals such as “to not have debt, to have a safe amount of savings and yet have adequate resources for the future,” says Mark Avallone, a certified financial planner and president of Potomac Wealth Advisors in Potomac, Md.
Even among those with savings, 43% have less than $5,000 socked away. Only a third of those with savings have a 401(k).
About half of older Millennials, ages 26-34, with savings have a 401(k), while just 14% of younger adults have started saving in such plans.
“They should be worried,” Avallone says of the Millennial generation. “They are solely responsible for their financial earnings power when they no longer can work or want to work. That means someone in their 20s, even on a modest income, will need to save $1 million or more (for retirement).”
And in the short term, the problem with prioritizing debt reduction over savings is that when emergencies arise, Millennials may not be prepared, says Tom White, CEO of iQuantifi, a financial site aimed at young adults.
“If you have a need for $1,000 and you don’t even have that in your checking or savings, what do you do?” he says.
For those who feel daunted by working toward the often-recommended three to six months’ worth of savings, White says at least get to one month before tackling debt.
Despite their debt load and small amount of savings, Millennials feel satisfied with their finances and confident about their ability to manage money — even though most also worry about their financial situation at least sometimes.
They’re also wary of taking on more debt, with many hesitant to pull out credit cards for items they can’t afford. Nearly half said they completely disagreed when asked if they usually buy things they can’t afford on a credit card. A little more than a quarter say they somewhat disagree.
There may be at least one encouraging sign for the country’s young adults: The data show “they are paying attention, which I think bodes well for the future,” says Andrew Plepler, head of global corporate social responsibility at Bank of America. “They are much more conscious of how important it is to live within your means and build savings and pay down debt. ”