The millennials are entering a productive age that mandates the need to save regularly. But this looks like a daunting challenge for many who were finding it difficult to save money for various reasons. Let’s identify the cause of poor millennial savings habits so you can improve yourself and escape your financial misery.
Over the years, research has identified that millennials always fall into the juicy temptation of purchasing discounted products that weren’t in their initial budget. Discount is a marketing tactic to bend consumer spending to the will of the producers or manufacturers. Millennials failed at identifying this sales strategy with their constant feeling of “Wow, it’s so cheap, I have to purchase this,” irrespective of their need and interests. Although discounts and cashback are excellent opportunities to purchase something, getting them based on impulse instead of needs is a huge flaw that has plunged most millennials into financial struggle and ruined their savings habit.
Shiny Little Toy Syndrome
Most of those looking forward to purchasing the latest iPhone 15 are millennials. This perfectly visualizes the idea of shiny little toy syndrome, whereby millennials tend to get bored of the educating trends and products and always want to jump on the latest, irrespective of their financial situation. The problem of always wanting the best new thing is an economic assassination that has become a common theme among the millennials. Ask yourself, do your old gadgets need replacing? Are there any needs that your old stuff hasn’t met? If your answer to these questions is “No and Yes,” you should postpone those purchases and save instead.
Debt is a mental and financial struggle that is not uncommon for millennials. It’s thought-provoking seeing our millennials developing the poor habit of using their credit cards and loans to meet their basic needs, secondary and even tertiary needs. The idea behind debt is usually a positive one financially. Still, most millennials have grown fond of defaulting on debts that have made them accumulate and grow larger to the point their income can’t match.
The mass awareness of financial literacy eludes many millennials. This is apparent in the poor handling of finances. Most millennials have failed to schedule their recurring expenses, such as electricity and internet bills, leading to late payments and accrued penalties. Additionally, many millennials nowadays have a poor understanding of the 10-30% saving rule and poor budgetary planning for the month. The side effect is poor saving habits since their monthly income is always used.
The basic idea of inflation in economics is that the higher the expenses, the higher the salary. But this is not the case with the present-day government and business owners that have grounded the wage and salary bracket at a standstill without regard for the rising cost of living. Millennials are mostly at the brunt of this problem, which makes it harder for them to have the idea of saving since their salary has been the same while inflation is at an all-time high.
“You Only Live Once” Mindset
You only live once is a sickening financial state of mind that has become a chronic nightmare that preceded reckless spending by the millennials. It’s a good thing to enjoy life to the fullest without regret, but what happens when you waste your salary on frivolities and live in poverty towards the end of the month? It’s a financial eyesore when millennials trade their long-term standard of living for monetary impulsive spending habits that place them in the jaw of financial struggle with no savings to fall back on in case of unforeseen financial needs.
The raging claw of student debts has been a sickening blow to most millennials trying to put some money into their savings accounts. The need for quality higher education has propelled them into seeking student debt. This is not a problem if a commensurate job opportunity offers them a good salary to pay it off. But the reality is that student debt continuously increases over time, coupled with the high cost of living. These realities have become a financial burden on the millennials, who are mandated to service their debts instead of savings.
Supporting Family Members
According to a recent American Association of Retired People study, one in four caregivers is a millennial. This is a saddening metric by all standards, considering millennials who are already facing the brunt of the world economic downturn and poor salary structure at all levels are still required to care for their aging parents and family members. This reality paints the perfect picture of another leak that leads to financial struggle and poor savings culture among the millennials.
Increasing Housing Cost
The general rule of thumb is that 50 percent of your income should go for necessities, 30% should go for discretionary spending, and the remaining 20 percent should go into your savings. No more than 30% of your income should be your housing expenses. This is the average American standard that has been tested and trusted. But in reality, this is not the case with the millennials who have to deal with rising housing costs that have engulfed American housing markets. Most millennials find themselves spending more than 50% of their income on their basic needs and housing costs.
A more significant percentage of unemployed Americans fall into the millennial age bracket. The Federal Reserve of St. Louis highlighted this in its annual report, which stated that the labor force participation rate among ages 25 to 54 years old stands at 82 percent. At the same time, the unadjusted unemployment rate in the United States is 3.9% as of August 2023. It’s general knowledge that a quality job or business is the most decisive factor in earning any sensible income. The messed up unemployment rate and the fact that most of the youngest millennials in their mid-20s are still in college or graduate school, feeding off scraps, has put the more significant chunk of the millennials in a messed up financial state.
Gig Economy Job
The gig economy is a widespread phenomenon that has become rampant among the millennials. This type of job is characterized by financial instability that can be attributed to the huff and puff of the job nature where you go smiling in a month and be out of a job in another. Additionally, the gig economy does not offer the type of job benefits and security like the traditional one. These are challenging prospects for millennials, who are mostly the key drivers of these types of jobs. The majority of the millennials who are in this category would find it hard to save or get out of their financial misery.
Rising Healthcare Cost
The United States has one of the world’s highest healthcare costs, with more than $4.3 trillion sinking into that, which is an average of $ 12,900 per individual. This is a sorry state for the millennials who must pay a significant amount out of their pocket before accessing quality healthcare. It’s inundating to note that the millennials who are already in the mess of financial downturn, rising housing prices, and other financial crises eating deep into their income also have to shoulder the hikes in healthcare costs, leading to renewed financial struggle and poor savings.
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