How Millennials mismanage their money

Money may not bring happiness, but having financial security is, as Forrest Gump said, “One less thing” to worry about. New research indicates that Millennials—Americans born between the early 1980s and the mid-1990s—have plenty to worry about when it comes to their finances that some who are having financial troubles look for some sort of cushion with loans from a hard money lender.

The study by PricewaterhouseCoopers (PwC) finds that large percentages of Millennials carry too much debt, are already dipping into their retirement, don’t have enough to cover an emergency and, perhaps most importantly, don’t know much about personal finances.

The PwC study found that just one in four demonstrated basic financial literacy, while fewer than one in ten had a more advanced understanding of money.  “Among the overall population, Millennials are the age group with the lowest level of financial literacy.”

That stunning statistic may be part of the reason Millennials are struggling so with their finances. Consider these findings:

–Nearly 30 percent “are overdrawing on their checking accounts.”

–Four out of five Millennials have at least one long term debt and one out of five with retirement accounts borrowed from it within the last year to pay bills.

–Half with student loans say they are worried about their ability to pay back the money, while half also “have carried over a credit card balance in the last 12 months.”

–Twenty-eight percent of Millennials with a college degree have taken out expensive payday loans or sold items to a pawn shop within the last five years to get cash.   The number increases to 50 percent when the Millennial has a high school degree or less.

PwC says these and other findings in the report show Millennials are financially fragile. “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.”

Additionally, the young financial fledglings are generally not getting good financial information.  Just one in four have sought professional advice on saving and investment.

Much is made of Washington’s profligate spending that has driven the national debt to historic proportions.  The increasing debt, and the interest that must be paid on that debt, is a growing burden on future generations.

As the PwC report shows, however, that next generation must get its own financial house in order before confronting the nations fiscal woes.

 





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