Millennials Apparently Good With Money
TIME reports that a new survey shows that Millennials are good with their money—recognizing that they need to save and become better with their money.
One of the financial virtues of this group appears to be a slow and steady approach to building a nest egg. Roughly a third favor a long-term tried-and-true strategy, Northwestern Mutual found. Another third would like to take that approach but feel like they are too far behind to play it safe.
Millennials’ cautiousness may be a double-edged sword. Just 14% in the survey say they are pursuing a high-growth investment strategy even though such a strategy would promise superior long-term returns. This may be a case of playing it too safe. Millennials have 40 years to ride out any bumps. If their money is socked away in savings bonds and other ultra-conservative investments it won’t grow fast enough for them to retire even over a long period of time. Now is when they should embrace prudent, low-cost, diversified risk through stock index funds and similar investments.
What makes the Millennial generation so thoughtful about money?
It could be that the financial crisis had a significant impact on how young people view money by virtue of making it difficult for them to get jobs and earn money at a time when they were getting their careers together, and forcing them to figure out how to get by on less. It has also been harder to access credit—preventing more people from opening up credit cards or taking out loans to buy houses and cars they may not necessarily be able to afford.
Credit-reporting firm Experian reported last year that Millennials have around 1.5 credit cards on average, compared to the 2.7 the Baby Boomers have on average. They also carry an average balance of $2,700 on their cards—below the national average of $4,500. Even so, the report also showed that “Millennials appear to be running into more trouble when paying their bills — whether on credit cards, auto loans, or student loans,” which may be related to whole difficulty of finding jobs and earning enough money thing. If Millennials are running into trouble paying their bills, that could be a reason “just 14% in the survey say they are pursuing a high-growth investment strategy” (AKA there is no money at the end of the day to put into retirement).