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8 Not-So-Good Financial Trends Among Millennials

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Jan 26th 2016
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Millennials, the generation that often eschews the values of its parental units, are a financially unsavvy lot who use dumb things like payday loans, pawnshops, and auto title loans to get by, according to a new study by PwC and the Global Financial Literacy Excellence Center at George Washington University.

More than 5,500 millennials, described as ages 23 to 35, were surveyed for Millennials & Financial Literacy – the Struggle with Personal Finance. The findings identify this generation's financial characteristics, as well as factors that threaten their economic security and goals.

“Millennials owe a lot. They know too little. Millennials' struggle with debt may eventually become our problem, too,” Annamaria Lusardi, academic director of the Global Financial Literacy Excellence Center, said in the study.

The study revealed eight key trends of millennials and how they handle their finances.

1. Insufficient financial knowledge. About a quarter (24 percent) indicated basic financial knowledge. Millennials are the least financially literate among all age groups. They understood more about mortgages and “numeracy” than inflation, diversification, and bond concepts.

2. Dissatisfied with their current finances. About a third (34 percent) indicated they are very unhappy.

3. Worried about student loans. More than 54 percent said they're concerned about being able to repay their student loans. Of those with household incomes of more than $75,000, 34 percent worry they won't be able to repay the loans.

4. Debt has no economic or educational boundaries. Regardless of education levels, millennials are over their heads in debt. Among college-educated millennials, 81 percent have at least one long-term debt, and two-thirds of all millennials have at least one long-term debt.

5. Financial fragility. About a third (30 percent) overdraw on their checking accounts, almost half don't think they could come up with $2,000 for an emergency expense, and 53 percent carried a credit card balance in the last year.

6. Significant use of “alternative financial services.” Within the past five years, 42 percent used payday loans, pawnshops, auto title loans, tax refund advances, and rent-to-own tactics. This is common for this age group – even for those considered middle class. Of those who use these services, 50 percent were high school graduates or less, 39 percent have bank accounts, 35 percent use credit cards, and 28 percent are college graduates.

7. Dip into retirement accounts. More than 20 percent with retirement accounts took loans or hardship withdrawals in the past year. About a third (36 percent) have retirement accounts.

8. Don't get professional financial help. Less than a third (27 percent) sought professional advice on savings and investments within the past five years, and 12 percent sought help with debt management.

The study concludes that the state of millennials' finances is worrisome because their practices could become entrenched. “The research has documented that the gap between the amount of financial responsibility given to young Americans and their demonstrated ability to manage financial decisions is rapidly widening,” the study states. And this “knowledge deficit” could be a personal, economical, and social disaster.

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Rowan Webb
By Rowan Webb
Mar 28th 2017 00:15 EDT

Knowledge is key in every single process that we wish to take on. The problem with millennials is that they prefer to do things their way without consulting professional advice or reading up further before taking up any loans or any other finances. Being desperate also plays a part in influencing their financial decisions especially those millennials with hefty debts. They see loans as a quick solution without looking at their long-term effects. Schools should conduct financial talks and make them compulsory before any millennials can graduate to at least spread awareness.

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