As millennials grow older, that generation of young people born between the early 1980s and the early 2000s, they are clearly a force to be reckoned with by the rest of society. A larger generation than even the baby boomers, the U.S. Labor Bureau predicts that, by next year, millennials will be the largest active generation in the American workforce and that, by 2030, they will represent 75 percent of all American workers.
However, even though most millennials are working, few of them seem to take saving money or investing seriously at this point in their lives, something their parents and employers find more than a bit alarming. While many may chalk that practice up to youth, the truth is a bit more complex. From their staggering student loans to their employment options, here are five of the top reasons why millennials are not saving or investing for the future.
1. The Great Recession
Today‘s millennials have inherited a much weaker economy than the generations that preceded them. From the dot-com bust to the housing crash, the Great Recession has taken its toll on this generation in a way that is truly unique. Many of these young people have seen their parents and grandparents lose jobs, hard-won retirement savings, and even homes during the past six to seven years, and while many of them were raised with a belief in the inherent value of saving and investing, the realities of the world they inhabit have left them skittish. (If you’re a millennial struggling with savings and investing, check out Absolute Wealth – it may be just the kick-starter to get you going in the right direction.)
Good jobs are increasingly difficult to find and land. Mediocre jobs still tend to have a lot of applicants, and most of the time, today‘s recent college graduates are finding that the only work they can get is work for which they‘re over-qualified and underpaid.
2. Student Loans – Arguably the Biggest Reason Why Millennials Are Not Saving or Investing
It was only a few decades ago that a student could work a full-time job during the summer, attend a state school, and pay for their tuition with their summertime effort. Those days are long behind us, and millennials have borne the brunt of the change. Student loan debt has been increasing by around 6% every year since 2008.
This increase in cost means the average student now graduates with around $30,000 in debt. Compare that with the average student in 2003, who graduated with around $11,000 in school debt. Add to that debt a weakened job market and wage stagnation, and it‘s easy to understand why millennials aren‘t treating savings and investment as higher priorities.
3. Fear of the Unknown
Saving and investing in a way that is wise and will earn money over time isn‘t a straightforward affair. For many millennials, a lack of expertise and familiarity with financial language, the nature of the markets, and the negative press associated with many of this country‘s biggest banks’ behavior all contribute to a fear of the unknown that keeps them from investing on their own or with the help of a financial adviser.
4. Monthly Bills
Another reason millennials aren’t saving or investing is because their monthly bills leave them with too little wiggle room. Rent, utilities, car payments, insurance, school loans, and more all add up quickly when you only pull a small, starting salary or you work an hourly job. Until most millennials pay off some debt or make more money, it‘s likely that the reality of their monthly bills will continue to keep many of them away from investing.
5. Unemployment and Underemployment
Unemployment and underemployment have affected almost the entirety of the American workforce since 2007 and 2008, but millennials really do feel it more acutely. While they tend to have fewer financial and familial responsibilities than their older counterparts, their lack of experience works against them in the job market, and their inability to show that they have commanded and deserve a higher wage works against them too.
Many recent college graduates have found that the only jobs they can get are ones outside the industry in which they want to work, and oftentimes, they find themselves working in retail or the food service industry – jobs that don‘t require a college education, and barely provide enough of a wage to deal with student loan debt. Additionally, many of them find that they aren’t offered full-time hours, which also keeps them too strapped for cash in the here and now to worry over saving and investing for their futures.
Ideally, millennials would not only have enough money each month to pay their bills, but they would also have enough to plan for a comfortable future. Unfortunately, current realities are not yet amenable to such a proposition. That being said, once millennials gain a bit of experience and pay off some debt – so long as the American economy continues its slow turnaround – there are still ways that they can create bright futures.