Millennials have gotten a reputation for having bad financial habits. Poor savings habits, living at home with Mom and Dad, and under a pile of debt. Despite the stigma, how much of it is true? In understanding millennial finances, we must first grasp the fact that millennials have some the highest education of any generation and still seemingly struggle with budgeting and saving. What’s the reason behind it?
Despite having the highest education among all generations, it has come in the form of substantial student loan debt. The average student loan debt per household is around the 100,000 mark, which leaves millennials starting off a new career in massive debt. This deters graduates from leaving the nest and taking on more debt.
Starting wages have become a problem for millennials as well. A new grad fresh out of college makes the same amount of money as an employee in 1989 without a college education. While wages have remained nearly identical for the past 30 years, the cost of living has risen substantially. This means that a larger percentage of paychecks need to be set aside towards necessities such as food, transportation, and housing. After this large chunk is taken out, there is little room left for saving and investing.
Even with a lower percentage left than their parents had, millennials are still saving money better than expected. Over a third of millennials save more than 20% of their income. That’s more than both the baby boomers and Generation X saved. Despite the improved savings habits, a dollar doesn’t go as far today. Due to increased cost of living, 20% doesn’t go far with today’s average income. Even with a smaller percentage being put away for savings, baby boomers had twice the amount of money put away at the same age.
Investment Zen has created an infographic that breaks down the big picture on how millennial finances compare to other generations. The infographic below shows a few interesting statistics on not only income, but several other key figures that show our more complete picture on their current situation.