Millennials didn’t enter adulthood under the best circumstances, with many starting their careers during the Great Recession of 2008. But economic timing isn’t the only challenge this generation has faced.

Let’s explore eight financial pitfalls that are hindering millennials’ financial success.

Constant Competition – Even With Themselves

Millennials often feel pressured to achieve what Kelly Palmer, CFA, the founder and chief wealth officer of The Wealthy Parent LLC, calls “the shiniest participation trophy.”

“We were told for decades we are special, and we want that to be true about our wealth, or lack thereof,” Palmer said. “With the demands of childcare, careers, aging parents, rising rates, and the constant message to ‘do it all,’ millennials are feeling the strain.”

Rising Child Care Costs

Millennial parents face a tough choice: working and paying for childcare or staying home and missing out on income and career advancement.

“Child care is expensive, but so is sitting out of the workforce,” Palmer said. “What should be a thoughtful decision based on personal goals often turns into a financial dilemma. Sometimes, staying home is the right choice for long-term mental health and future career reentry.”

Not Using Credit Cards Wisely

While all generations should use credit cards responsibly, many millennials struggle with this. A recent Quicken Inc study found that about 53% of millennials were more reliant on credit cards this summer than ever before.

“Pay off your credit cards in full each month to avoid carrying a balance,” said Kendall Meade, CFP at SoFi. “Don’t use credit cards to buy things you can’t afford. High interest rates can make debt hard to pay off, costing you a lot in interest. Always check your statement for interest rates.”

Not Paying Off Consumer Debt

Millennials also face the trap of not paying off consumer debt, particularly credit card debt, which has high interest rates.

“As of Q2 2023, credit card balances rose by $45 billion to reach $1.03 trillion,” said Meade. “High interest rates benefit savings accounts but make credit card debt more expensive. Millennials carry the most consumer credit, with $2 trillion, representing about 43% of the total.”

Relying on Social Media for Financial Advice

Over the past two decades, social media has become a constant presence in our lives. Millennials often rely on these platforms for financial advice.

“About 20% of millennials use social media for retirement planning advice,” said Douglas Ornstein, CFA, senior manager at TIAA Wealth Management. “While some influencers provide helpful tips, it’s risky to rely solely on social media. Talk to a financial advisor, review your budget, and create a plan for your financial goals.”

Student Loan Debt and Lack of Financial Literacy

Millennials are burdened with student loan debt and often lack the financial education to manage it.

“Fifteen million millennials have student loan debt, more than any other generation,” said Zachary Sarf, founder and CEO at Create Every Opportunity. “This debt highlights the lack of financial education in high schools. It’s hard to blame students who aren’t taught basic financial literacy.”

Fortunately, there is progress. “Twenty-two states have passed financial literacy laws in high schools, helping future generations avoid these money traps,” Sarf said.

Waiting to Save for Retirement

Delaying retirement savings can have significant consequences. Starting early allows your savings to grow through compounding.

“Starting early lets you contribute more and benefit from compounding,” Meade said. “Even small delays can greatly impact your outcome. Assuming a 7% return and a starting salary of $75,000 with a 2% annual increase, here’s what you could have by age 50 if you contribute 15% starting at different ages:

– Start at 22: $1,014,071

– Start at 25: $779,384

– Start at 30: $485,936.”

Making Risky Investments

Millennials may feel they have plenty of time before retirement, leading them to take more investment risks or over-invest in volatile assets like cryptocurrency.

“Don’t put all your money into one stock, sector, or type of investment,” Meade said. “Alternative investments and individual stocks should make up no more than 5% of your overall portfolio.”