Who are millennials? Born between 1981 and 1996, millennials are the largest generation in the U.S., numbering about 72 million. The oldest millennials are in their early 40s, while the youngest are in their late 20s. These years are crucial for developing financial plans. With debt and lagging incomes, millennials face financial challenges. Here are some statistics and tips on financial planning for millennials that can make a significant difference.
To learn more, check out the infographic below, created by Wilson College Online’s Bachelor of Science in Accounting program.
Millennial Financial Statistics
What are millennials’ spending habits like? What about their debt and income? Examining millennial financial trends reveals the challenges this generation faces.
Millennial Financial Trends
Millennial debt continues to rise. A recent Experian study found that between 2021 and 2022, the average debt for millennials increased by 15%, reaching a record high of $115,784.
In just one year, millennials saw their credit card debt surge by 23.4%, while their mortgage debt went up by 9.8%. They also experienced smaller increases in auto loan debt (5%) and student loan debt (0.9%).
Income vs. Spending
Millennial households report a solid pretax income, but their spending nearly matches their earnings. In 2020, households earned $71,566 on average, while the average millennial spent $70,147 per year, leaving little room for savings.
Comparing the Generations: Millennials vs. Gen Xers
How do millennials and Gen Xers compare financially? Data shows that millennials have a lower net worth and higher student loan debt than Gen Xers did at the same age.
In 2019, millennials had a median net worth of $23,130, compared to $32,359 for Gen Xers at the same age. Millennials reported an average of $27,500 in student loan debt, compared to $11,500 for Gen Xers at the same age, according to the Employee Benefit Research Institute. Additionally, 45% of millennials aged 25 to 36 held student debt, compared to 25% of Gen Xers at that age, per a U.S. Government Accountability Office study.
However, millennials and Gen Xers reported similar total debt levels at ages 25 to 36, with $38,500 for millennials and $39,500 for Gen Xers.
Money Anxiety for Millennials
Most millennials worry about their financial futures. According to the 2022 Investopedia Financial Literacy Survey, 74% report stress about their finances. Their top concerns include saving money, paying off debt, and planning for retirement.
Over 70% of millennials also worry about their financial security in retirement, according to the National Institute on Retirement Security. In comparison, 59% of Gen Xers and 43% of baby boomers worry about retirement finances.
Financial Planning Tips for Millennials
Cutting out avocado toast and making coffee at home won’t drastically change anyone’s budget. However, controlling spending, decreasing debt, and boosting savings can set millennials up for financial success.
1 Manage Spending
Fixed expenses make up the largest part of people’s budgets, so managing these can have a significant impact. Common fixed expenses include rent or mortgage payments, utilities, and car expenses. Health insurance, student loans, and child care are other common fixed expenses.
By focusing on increasing income and decreasing spending, millennials can have the largest impact on their finances. They can increase their income by finding a new job, adding new skills, asking for a raise, or taking on a side job.
To decrease spending, they can cut unnecessary expenses, lower bills, pay off debt, or cap spending on fun activities. Additionally, cutting hidden costs like interest charges, subscription service fees, or banking fees, and reducing technology upgrades and impulse buys can help manage spending.
2 Decrease Debt
Paying off debt frees up more money for savings or other financial priorities. Millennials report an average monthly debt payment of $443, according to a recent Credit Karma study. This often includes student loans, car loans, and credit card debt.
Millennials carry an average student loan debt of $31,297 and an average car loan debt of $23,766. On average, millennials owe $5,898 on their credit cards. By paying down their debt, millennials also save on interest.
3 Increase Savings
Increasing savings gives millennials financial freedom. By creating an emergency fund, saving for retirement, and prioritizing savings, millennials can improve their financial future.
Emergency Savings
A majority of millennials—59%—do not have enough emergency savings to cover three or more months of expenses, according to Bankrate’s 2023 emergency savings report. Additionally, 27% have no emergency savings. Millennials should aim to have an emergency fund that can cover three to six months of their expenses. They can start small and keep building their emergency fund.
Retirement
Millennials will need an estimated $3 million to retire. Yet, in 2022, the median 401(k) balance for those aged 25 to 34 was just $11,357, while for those aged 35 to 44 it was $28,318, according to a 2023 report by Vanguard.
There is some good news. Millennials started saving for retirement earlier than previous generations. While the median age to start saving was 30 for baby boomers and 28 for Gen Xers, it was 25 for millennials, as reported in a Kiplinger article.
Saving and Investing
To maximize their savings and increase their investments, millennials should aim to save 15% to 20% of their gross income if possible. They should maximize their employer’s 401(k) matches and prioritize savings accounts with tax advantages. Investing in index funds over the long term can also be beneficial.
Financial Tools for Millennials
As millennials enter their peak earning years, it’s important that they prioritize financial planning. The following tools and resources can put millennials on the right path.
Financial Tools
Many financial tools can help millennials plan for their futures. Budget tracking programs like Mint and YNAB offer tools to create and manage a budget. Credit monitoring sites offer free annual credit reports. Millennials can secure their savings with FDIC-insured high-yield savings accounts to take advantage of high-interest rates.
Finding Reliable Resources for Financial Planning for Millennials
How can millennials find reliable resources for financial planning? Nearly 8 in 10 millennials and Gen Zers say they have gotten financial advice from social media, according to a survey commissioned by Forbes Advisor. The most trusted platforms include Reddit and YouTube. However, 28% say they have lost money by following financial advice from social media.
Millennials can strengthen their financial literacy and plan for their financial future by identifying reliable resources.
Planning for a Financially Secure Future
Millennials have faced turbulent economic conditions, from the Great Recession to the COVID-19 recession. By planning ahead now, millennials can set themselves up for a financially secure future.
