Meet the generation who's throwing it all away for avocado toast.
Just kidding. This isn't another millennial hit piece. But we've all seen this brand of generational slander before. And while the list of things that Gen Y has ruined continues to blossom, there is one stereotype that reigns supreme:
Millennials are bad with money.
Now, this is a pretty serious accusation considering that individuals born between 1981 and 1996 are the largest contingent in today’s workforce. So, just how true is it?
As the generation who grew up in and/or entered their respective professions during the Great Recession, many have faced unique financial challenges that past generations have not. In this article, we examine how these challenges have shaped the ways millennials view, spend and prioritize money. We also highlight the impact on one specific sector of this generation: medical professionals.
Let's dive in.
It's no secret that student loans are public enemy number one of young professionals everywhere.
Business Insider reports that college costs are now two times higher than they were in the 1980s. Both the number of student loan borrowers and the amount being borrowed continues to increase. Naturally, student loan debt is at an all-time high as well.
So, it should come as no surprise that:
- 80 percent of millennials view repaying their debt as extremely important.
- 1 out of 5 consider it their top priority in life, period.
For most college grads, conquering student loan debt is the necessary first step to unlocking the future they were told a degree would provide. Doing so will enable them to free up their cash and concentration to tackle other priorities more effectively.
This hits especially close to home for those pursuing a career in the medical field. In 2018, the average new doctor entered practice with over $196,000 in student loan debt.
Contrary to popular belief, the idea of homeownership is well-received by millennials. However, many say that they simply cannot afford it.
According to research conducted by the Urban Institute, the millennial homeownership rate is 7 to 7.2 percent lower than the homeownership rate among baby boomers when they were the same age.
So if it's not lack of interest, then what explains this decline?
Aside from the crippling side effects of student loan debt mentioned above, home prices have gone up considerably. Today, millennials who are buying their first homes are forced to pay 39 percent more than baby boomers who purchased their first home in the 80s. Thus, the inability to afford a down payment is one of the key reasons why most millennials are not prioritizing homeownership. It's not that millennials prefer to rent; in many cases, it's the only option.
Another reason why homeownership is not a priority for millennials is due to the fact that they this is a generation that is not afraid to change jobs. Young people’s career aspirations take them from one place to another, so being grounded in one place is not an option for most of them. This makes homeownership a not-so-ideal choice at this point.
In the case of the medical profession, the rise of locum tenens work is a perfect example. For debt-ridden docs looking to stay put, however, there are other options.
A report from Bank of America indicates that the majority of millennials who have a budget do stick to it every month.
In fact, most say they feel financially secure – at a level on par with previous generations. However, many millennials still believe that their generation is not good at managing money. Approximately 75% of millennials admit that their generation overspends compared to previous generations.
But just how accurate is this belief?
For starters, one of the key reasons why millennials overspend on unnecessary indulgencies is peer influence. Now of course, peer pressure is nothing new. But in the age of digital information (and misinformation), it's more or less spiraled out-of-control. The pressure to conform to the financial habits of their peers primarely originates from social networking sites, where users are constantly bombarded with financial goals and milestones of others.
In terms of how much they’ve saved, millennials have shown an impressive improvement over the past few years. The same report indicates that:
- Approximtely 47 percent of millennials have at least $15,000 in savings.
- 67 percent of those who have a savings goal stick to it most of the time.
So with an astronomically higher starting income and amount of debt, where do new doctors fit into the equation? Most are actually encouraged to continue living like they did as a resident in training. This is intended to help them avoid overspending, and instead, prioritize debt repayment. Needless to say, new doctors are not immune to the saving and budgeting obstacles faced by their generational peers.
The good news is that millennials are expected to live longer than both Generation X (their parents) and Baby Boomers (their grandparents). According to the National Institute on Retirement Security over 50 percent of millennials are expected to live up to 90 years and beyond.
The bad news is that millennials will need to save considerably more than the generations before them in order to sustain their lifestyle during retirement. Financial experts cite that this generation will need to put aside 15-22% of their money for retirement, which is twice the recommended amount for past generations.
Another key finding of the report is this:
Roughly 66 percent of millennials have not started saving for retirement.
Although most employers offer some type of retirement plan, only 34% of working millennials say they participate. This report further reveals that only 5 percent of working millennials are currently saving adequately for retirement under the advisement of financial experts.
It's worth noting that all amidst the rise of the "Financial Independence, Retire Early" movement (FIRE for short). For doctors entering practice today, it'll be interesting to see whether or not they embrace this trend.
Check out: The Ultimate Guide to Retirement Planning
Generally speaking, millennials are viewed as less financially savvy compared to previous generations. Common areas of criticism include:
- Debt repayment.
- Budgeting and saving.
- Retirement planning.
While the stigma of being "bad with money" persists, many studies are shining light on the causes of this generation's unique financial challenges and habits that have been created as a result. Even for new doctors entering practice, that glorious first paycheck doesn't mean they're off the hook either.
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Jack is the Head of Content & SEO at LeverageRx, a digital lending and insurance platform for the medical market. He helps healthcare professionals make smart, swift financial decisions.