In many ways millennials – generally defined as those born between 1980 and the mid-1990s – have a tougher time than older generations. The advantages of youth, good health and “having their whole lives ahead of them” are offset by the fact that so many of this generation are struggling financially, often having to turn to desperate ways to make ends meet. Figures released in early 2016 by PriceWaterhouseCoopers and the Global Financial Literacy Excellence Center at George Washington University showed that 42 percent of millennials have resorted to “alternative” finance such as payday loans in the past five years. A 2014 report by the Financial Ombudsman Service indicated that 25-34-year-olds were far more likely to have problems with payday lenders than any other age group.
The PriceWaterhouseCoopers study also indicated that 81 percent are saddled with long-term debt such as student loans or a mortgage, and – not surprisingly – that a significant number carry credit cards and/or are overdrawn on their accounts. The level of debt that these young people carry is far greater than what was typical even of established families not that long ago.
It’s not All Bad News
Though temporary loans are often seen as a desperate last resort, they aren’t always the worst option, particularly since regulations imposed within the past couple of years have led to improvements in the industry and the virtual elimination of the loans’ most egregious aspects. Certainly taking out a payday loan doesn’t have to signal the beginning of a steady downward spiral, as long as the borrower is careful to research all options before taking out a loan and ensuring that he or she is taking out the loan for an appropriate reason and is prepared to meet the loan’s terms. Many if not most people get into trouble with payday loans when they take the loan out for a non-essential lifestyle purchase, to cover bills that are recurring and expected, or to cover another debt. By looking realistically at the whether the additional funds are actually needed, whether the funds for repayment are within one’s budget, and whether one is adopting the use of payday loans as a way of life, it is not too difficult to avoid the problems that some have had with the loans.
For better or Worse, Mum and Dad had a Big Influence
Notwithstanding the struggles of the younger generation, and the shaky economic climate that has proven to be challenging for people of all ages, not all millennials have it so rough. Those who were lucky enough to have parents who set good money management examples have about twice the savings and half the debt as those who weren’t so fortunate, according to a survey by the credit checking firm Experian, dubbed Millennial Me & My Money.
Those whose parents failed to instill an awareness of and commitment to good financial practices, on the other hand, are more than twice as likely to not save any money on a monthly basis than are their counterparts whose upbringing included an emphasis on good money practices. The old adage that ‘the apple doesn’t fall far from the tree’ certainly seems to apply where money handling is concerned.
Though the Experian survey is, like all such studies, based on the subjective experiences of the participants, there still seems to be a worthwhile lesson here: teaching kids to handle money responsibly is one of the best gifts a parent can give his or her child. Though millennials whose parents weren’t such sterling examples can’t go back and change the past, what they can do is resolve to improve their own financial well being so they can set a good example for their own children. If so, maybe the next generation won’t be faced with so many financial woes, and a crippling cycle of never-ending debt and the emotional stress it imposes can be broken, once and for all.