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By: Hillary Hoffower
www.businessinsider.com
- Millennials are the generation born between 1981 and 1996.
- Because they came of age during the Great Recession, millennials are dealing with a number of financial problems.
- Some of millennials’ most critical money problems are student loan debt, inflating living costs, unexpected expenses, and needing to save more for life milestones.
Defined as the cohort born between 1981 and 1996, millennials are the generation known for being tech-savvy, pursuing their passions,and killing a bunch of industries. They’re also known for shouldering a number of financial burdens specific to their generation.
This is in large part due to the fact that millennials grew up or entered the workforce during the Great Recession, creating unique financial challenges.
Even though millennials benefited from a 67% rise in wages since 1970, according to a Student Loan Hero report, the increase hasn’t kept up with inflating living costs. That’s not to mention that millennials are bogged down with student loan debt, are working to catch up on lost income, and have to save more for life milestones, like a buying a house and retiring.
But many millennials are so strapped for money that they are relying on others — like their parents or grandparents — for financial help.
Below, see some of the most significant money issues millennials are facing today.
Millennials are burdened with student loan debt that’s higher than ever
Crushing student loan debt is one of the most notorious expenses burdening millennials. College tuition has more than doubled since the 1980s; as a result student loan debt is at an all-time high, with the average student debt per graduate who took at loans at $17,126, Business Insider reported in November.
Not only has the number of students taking out student loans increased by 10% from 2000 to 2012, according to a report by the American Academy of Arts & Sciences, but students began borrowing more money too — the median cumulative loan amount rose to $20,400 from $16,500 in that time.
Millennials have to save longer to buy a house
Home prices are on the climb and millennials are paying for it — literally.
Millennials buying their first home today will pay 39% more than baby boomers who bought their first home in the 1980s, according to Student Loan Hero. In fact, the value of homes has increased by 73% since the 1960s, when adjusted for inflation.
Maybe this is why homeownership among millennials is at a record low — they have to spend more time saving money to buy a house. In some cities, it can take nearly a decade to save for a 20% down payment on a house, according to a SmartAsset report.
Millennials are shelling out money for soaring rents
Meanwhile, many none-homeowning millennials are devoting their hard-earned cash to soaring rents.
Rents increased by 46% from the 1960s to 2000 when adjusted for inflation, according to Student Loan Hero. In 1960, the median gross rent was $71, or $588 in today’s dollars. By 2000, that number rose to $602, or $866 in today’s dollars.
Many millennials are struggling to build wealth
Millennials born in the 1980s are at risk of becoming a “lost generation” for wealth accumulation, according to a report by the Federal Reserve Bank of St. Louis.
The report found that as of 2016, they had wealth levels 34% below where they would most likely have been if the financial crisis hadn’t occurred, making them the slowest cohort to recover from the Great Recession. They’ve been struggling to catch up ever since.
Underemployment, living costs, and student loans have made it difficult for millennials to get ahead, Shannon Insler wrote in a Student Loan Hero report.
More millennials are caring for aging parents — and spending more money doing so
An increasing number of millennials have to care for their aging parents, according to Clare Ansberry of The Wall Street Journal. The share of caregivers who are young adults has increased by 2 percentage points, to 24%, since 2009, she reported.
And despite earning less, millennials are also spending more than older caregivers. Scott Williams of the global initiative Embracing Carers told Ansberry that millennials spend 27% more of their incomes on caregiving than other generations in the same situation, and that one-third of millennial caregivers who have jobs earn less than $30,000 on average.
The average cost of elder care can range from $18,000 a year for adult day care to $91,000 a year for a private room in a nursing home, Business Insider’s Rachel Gillett previously reported, citing a survey commissioned by Genworth Financial.
Many millennials rely on their parents for financial assistance
It can be hard to find money to care for your parents when many millennials rely on them for financial help in the first place. More than half of Americans (53%) aged 21 to 37 are so strapped for cash that they have received financial assistance from a parent, guardian, or family member since turning 21, according to the Country Financial Security Index.
This money is going toward both small and significant basic needs, like cell phones, groceries and gas, health insurance, and rent.
Millennials need to save more money for retirement
Thanks to inflation, $1 million is no longer what it used to be. In 40 years (around the time millennials will be retiring or in retirement), $1 million in savings would have the same spending power as $306,000 today, Business Insider previously reported, citing a 2016 Time magazine estimate.
According to one financial planner, for millennials who are currently 32 and plan to retire at age 67, the average annual withdrawal from $1 million in savings will be below the poverty line based on inflation.
This means that millennials need to save even more for retirement. That’s not good considering 25 to 34-year-olds are only saving 5.3% of their income, according to Vanguard, which manages 401(k) accounts for 4.4 million Americans.
Many millennials are also investing unwisely, preferring to use cash investments, which don’t yield great returns.
“Millennials are going to have the biggest retirement-savings burden in history,” Greg McBride, the chief financial analyst for Bankrate.com, previously told Business Insider. “The nest egg that they’re going to have to accumulate on their own is going to be bigger than any other generation.”
