Financial Challenges Facing Millennials

9/1/2021

 Millennials have long been criticized for their inability to face life’s challenges.  Now these Millennials are adults and are facing a variety of financial challenges, many of which older investors have not had to deal with at the same level.  These financial challenges are often driven by the financial priorities of Millennial investors, so in order to understand the challenges, one must first understand the financial priorities of this investor segment.

Spectrem Group recently conducted research with Millennial and Gen X investors, seeking insight into their financial priorities, attitudes, and behaviors.  These insights then drove further analysis of the unique challenges and roadblocks these investors are facing in today’s financial world.  How these investors define success drives how they perceive many financial challenges in their live.

Over half of wealthy Millennial investors define success in life as being financially independent.  Second to this is the belief that being financially stable defines success.  Owning a home is the only other definition of success that over a third of Millennial investors identified.  Financial independence requires that Millennial investors are able to pay their monthly expenses on their own and are not dependent upon anyone else for financial matters. 

Being independent financially is often the result of paying down debt and confining spending to a budget.  So, it comes as no surprise that the most common financial challenges for Millennials are paying monthly expenses, as identified by 48 percent of Millennials, and paying off debt, identified by 37 percent of Millennials.  This is significantly different from Gen X investors, whose top financial challenge is saving for retirement.

Following a budget is often accomplished through the use of apps or tracking systems, and Millennials are most likely to be using Excel to manage their monthly budgeting.  Twenty-three percent of Millennials also use Goodbudget for monthly budgeting, while 21 percent use Quicken.  Gen X investors are far less likely to be using an app or system for budgeting.

Other challenges that millennials are more likely to identify than their older counterparts include buying a home (34 percent), and paying off college loans (27 percent), while Gen X investors are more likely than Millennials to identify wealth accumulation and funding a vacation among their top three financial challenges.

Those challenges are what drives the most important financial task facing Millennials, which 39 percent identify is paying off debt.  Once debt is paid off it is much easier to confine spending to a budget and be financially independent.  Saving for retirement is the second most common priority among Millennials, with 20 percent indicating that is their most important financial task in the next five years.  Owning a home comes in third, with 11 percent feeling home ownership is the most important financial objective in the next five years.

Regardless of what many older investors may think about Millennials, they are facing unique challenges that generations before them have not had to face.  These investors are participating in the economy and the markets, which makes it important for all investors to be aware of their behaviors and preferences.