The Importance of Financial Literacy For Millenials, by a Millenial
By Baillie Ward
The jury’s still out on whether or not millennials can handle their money. A quick Google search shows conflicting opinions, some believe we’re quickly overtaking older generations with our savings goals, while others believe we will never be able to grasp the concept of setting a goal for retirement.
However, a more open search reveals more negative attitudes towards the millennial generation. Millennials are easy targets when it comes to assigning blame, especially regarding our irresponsible spending habits and obsession with avocado toast (which, by the way, is not actually why we can't afford to buy a house).
The grim future of retirement savings is undeniable. With the reliability of Social Security up for debate, most experts estimate that today’s millennial needs to have between $1.8 to $2.5 million saved in order to retire comfortably, depending on their age. In spite of this, however, priorities seem to be shifting in the younger generation. Rather than saving money to leave the workforce and retire, a long term goal, millennials are setting aside money for a comfortable lifestyle now rather than later. This makes sense- as a millennial, it can be hard to think long term, especially when we have to think in terms of decades rather than months or years. It’s much more appealing to set savings goals towards rewards we can gain sooner, such as saving up for a European vacation, a cross-country road trip, and of course- avocado toast. More than 80% of millennials prioritize spending money on travel, indicating that our generation has started to value experiences and freedom over guaranteed financial stability in the future. This doesn’t mean that we aren’t saving money; on the contrary, we save an average of 36% more of our annual income than our older counterparts.
Coming from someone who pinched pennies for months to study abroad in London for 6 weeks, eats brunch regularly, and indulges in the “treat yourself” philosophy all too often, I have fallen on both sides of the millennial spectrum. I have been irresponsible with my spending habits, and I have made a concerted effort to set aside a portion of my income to reach my personal goals. Because of this, I know the importance of setting savings goals and the gratification that comes with accomplishing those goals.
Regardless of our end goal, many of us want the same thing: a comfortable, debt-free life. Yes, saving for retirement is a big part of that, and is something we probably need to prioritize more. But what’s more important is that we’re financially literate enough to be able to make educated decisions about our financial priorities on our own. Being financially literate means that you, “have the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being”- essentially, you understand the ins and outs of financial planning and how to achieve your savings goals through investing, saving, and managing a variety of financial resources.
If you’re a beginner to financial planning, you can continue reading to discover some tips on both becoming more financially literate and making financially responsible decisions. If you’re an expert, feel free to leave us a comment on what resources you’ve found to be helpful during the process.
- Use online resources
There are an abundance of online resources dedicated to helping you make progress in your financial literacy. Some are government sponsored, such as MyMoney.gov, while others are well-known for helping out beginners in the financial planning stages, such as Investopedia and CashCourse.
- Read the news
This one may sound a bit irrelevant, but staying on top of current events and understanding what is going on in the world can offer you some insight on changing financial trends. It will also allow you to be aware of important updates to current programs you may be considering or using, especially with budget cuts impacting programs such as education and federal financial aid.
- Check your credit score
Most credit card companies offer free credit score checks that will allow you to determine whether or not businesses see you as a dependable consumer. A negative credit score can influence your ability to buy a car, a house, or even the newest iPhone.
- Start saving now
We all have that friend whose card has gotten rejected trying to buy a $3 cup of coffee. Maybe we are that friend. Maybe we should encourage that friend to be a bit more responsible with their money. Starting early is much better than showing up late in the game, so come up with a savings plan that works for you. Try limiting your spending to a certain amount per day, or spend a week making every meal at home- set aside the money you would have spent into a special savings account for something you’ve been wanting to do (or put it towards retirement).
- Read up on the benefits your employer offers
This one is important. Find out what benefits your employer offers, and find ways to take advantage of those benefits. For example, here at Benevate, we partner with employers to offer comprehensive financial wellness solutions designed to help employees improve their financial well being through interactive and encouraging financial wellness challenges. We also offer employers the option to incentivize their company by setting aside a budget that helps their employees pay off student loans, put a down payment on a home, or save for their child’s college education. When you get started with our program, you complete a financial health assessment that rates your financial status regarding cash flow, savings, and retirement goals. Other companies offer benefits such as 401(k) matching, health care, or paid leave. These are important factors to consider in the job market- you want your employer to care about you as a person, not just as an employee.
Financial literacy is imperative to financial stability, and if you feel like you may be behind, it’s best to start learning now. $2.5 million is a lot of money, but it’s the target goal for those of us who would like to be able to support ourselves once we leave the workforce. The more financially literate you are, the better you will be able to plan out your savings goals to be able to save for retirement and save for next summer’s vacation without having to sacrifice your future or your freedom. There are plenty of free online resources designed to help you every step of the way, but if you think you’d be interested in learning more about what we do, talk to your employer about requesting a demo with Benevate today. We’d be happy to discuss the opportunity of joining your team on the journey to financial wellness.