A great deal has already been said about millennials that run to this day: entitled, self-absorbed, impulsive, ambitious yet lazy, compulsive job-hoppers, and so on. Poor Millennial money habits is another common stereotype. But they are so much more than meets the eye.
Although generalizations are not always accurate, millennials, on the whole, are bound by the reality that they have grown into adulthood amid a serious financial crisis—the Great Recession. They became pioneers of the digital age yet guinea pigs of technological change. Now, they are soldiers surfing through the economic flip-flops brought about by a global health crisis.
Millennials, also known as Generation Y, make up the people born between 1981 and 1996 or those currently between 25 and 40 years old. According to the latest data, there are 1.8 billion millennials worldwide and around 30 million in the Philippines.
Research estimates that they will compose half of the global labor pool by 2050. As this generation is slowly making its way to becoming a vital part of the workforce, it should be no surprise to know that they are working differently than their predecessors and even successors.
But are their financial ways better? Find out which money habits are unnoticeably barricading millennials from financial success and how they can be fixed.
The financial health of millennials is complicated. Millennials appear to have slightly less accumulated wealth than previous generations did at the same age. But is this due to bad Millennial money habits?
Millennials, on average, have delayed or abandoned marriage more compared to previous generations and have been “slower in forming their own households,” according to Pew Research. They are also more likely to be still living with their parents. They are also no better than their successors, Generation Z or Gen Z, especially when it comes to finances.
Both generations have become more conscious of saving money, budgeting, and investing for the future as they deal with challenges caused by the COVID-19 pandemic. But Gen Zs, or those born between 1997 and 2012, seem to be quite ahead of millennials.
On average, Filipino Gen Zs have started saving money at 17 years old and investing at 21 as they continue to educate themselves about finances actively. Millennials in the Philippines only began saving at age 23 and investing at 27.
The study also found that as millennials take on more responsibilities at work or start to have their own families, they have become more accepting of risk while acknowledging the need for financial protection.
What Do Millennials Do with Their Money?
Despite headlines calling them narcissistic, entitled, lazy, and other unfavorable names in the book, most millennials still end up achieving financial success. How can their seemingly nonchalant disposition still lead to this victory?
As the world and the Philippines continue to grapple with the COVID-19 pandemic, millennials have developed a money mindset and expressed a heightened responsibility to take more proactive steps toward achieving financial security.
In fact, recent data shows that 79% of Filipino millennials are insurants, 78% are subscribed to government savings programs, 60% are into cryptocurrency, 45% own accident insurance, and 38% have mutual funds.
Most millennials now worry about uncertainties of the future, saving money so they can protect themselves against impending unfortunate events as they continue to fund their daily living expenses while supporting their family’s needs. These money worries and setbacks made them generally good financial planners, thinking about retirement even at a young age.
According to Natixis Global Asset Management, millennials are more likely to save for retirement than their parents from the Generation X or baby boomers group. Around 75% of millennials are also consciously tracking their expenses compared to 64% of baby boomers, according to a T. Rowe Price study.
As a matter of fact, more than 40% of Filipino millennials now own pension and retirement products, while 29% own Unit Investment Trust Funds.
However, for every positive financial fact about millennials, there are also negative ones.
Most millennials see credit cards as a Band-Aid solution to all financial problems. It is a convenient way for them to tide themselves over until they receive the next paycheck. Using credit cards is all fun and games until you spend more than what you can afford and eventually miss payments and incur penalties—suddenly, you have credit card debt.
A study has found that 57% of millennials would not think twice about cashing out from their credit cards when a worst-case financial crisis emerges.
Turning Bad Millennial Money Habits Into Good
Poor money habits make it difficult for millennials to find their footing in personal finance. Throw in a growing economic uncertainty amid a worldwide pandemic, and it can seem incredibly daunting for millennials to put their financial situation on the right track.
There are money habits that are unnoticeably setting millennials up for financial failure. Here are bad money habits to drop and good ones to build as early as now.
1. Racking up credit card debt
When you are not making enough to make ends meet and need to pay your monthly bills, putting some extra expenses on the magic plastic card can be tempting. Or, when you have been dying to have that new, expensive smartphone, it’s easy to buy and charge it to your credit card.
While these cards provide convenience, welcome flexibility, and reward redemption opportunities, they can quickly become a serious debt burden if you are not careful enough. Do not waste money on interest; try to pay your balance in full each month to avoid credit card debt.
2. No financial goals
Are you in your 30s and still have not set concrete financial goals? Working through your finances is easier when you have developed a money mindset early in life. Your goals will help you learn how to earn, budget, and save money smoothly.
These financial goals are usually tightly interwoven with personal goals. Maybe you aim to save money to travel the world or work part-time and spend more time with your loved ones. It is a good habit to get a sense of your personal goals to align them with your professional and financial goals.
3. Spending more money than you earn
The real struggle in having money is managing your needs and wants. Balancing how much you spend and how much you earn is one of the top factors that can make or break your financial health. Finance experts suggest aiming to spend less than you make, with the goal of saving at least 20% of your monthly income.
It may sound simple, but life can get in the way, and you may encounter a couple of unexpected expenses. Even if you find yourself not making enough to meet your basic needs and just unable to spend less than you make right now, earning more than you spend should always be your ultimate financial goal.
4. Refusing to grow money through investing
Investing will increase your income and put you up for financial security only if it is done properly. Millennials are known to follow either their instincts or go along with their peers when investing. Meanwhile, 65% of affluent millennials entrust their money to financial advisors, based on an Investopedia survey.
If it’s within your means, invest more in health, auto insurance, and home or renters insurance. In the Philippines, real estate investment is slowly becoming the top option as the country adjusts to the new normal.
5. Ignoring your loans
Nowadays, millennials find it more practical to apply for a loan when buying a new gadget, getting a new car, paying for children’s education, and so on. However, repaying these loans can take time to finish.
The bill sometimes slips your mind; paying it late here and there until it becomes a habit. But late fees pile up and become a waste of money. Do yourself a favor and make it a goal to pay your loans early as soon as you get the bill.
Breaking the Stereotype for a Financially-Healthy Future
Veering away from the unfavorable latte-drinking, yoga mat-toting, and impulsive job-hopping stereotypes about the 25-to-40 generation, millennials are actually growing into successful moneymakers despite being hit hard by the Great Recession and, most recently, the global COVID-19 pandemic.
They are known as the generation championing the “experience economy” or what some call the #YOLO movement. The major economic setbacks allowed millennials to prioritize their mental and personal well-being, shelling out cash more on real-life experiences—enrolling in art classes or going on trips that are not just for Instagram selfies but also for experiencing life and pursuing their passion.
Gen Zs, baby boomers, and older generations thank them for redefining the 21st century with Facebook, Tumblr, Instagram, Snapchat, and more.
Millennials may get a bad rap for splurging on travel and entertainment over buying a home and starting a family, but at the end of the day, they spend their money as they see fit, saving for the rainy days and securing their future all while making the most of their precious yet fleeting youth.