When it comes to millennials and money, they have a bad reputation. The Pew Research Center defines millennials as people born between 1981 and 1996. Despite this wide age range, many stereotypes exist about millennials, including poor work and financial habits, especially when it comes to student loan debt, managing a monthly budget, and saving for the future.
But you may be surprised by how frugal millennials really are. Here are some facts about millennials and money that you should know.
1. Nearly half of millennials have a side gig
During the 2008 recession, many millennials watched their parents lose their long-time jobs and investments. They learned the importance of diversifying their investments and of having multiple income streams.
With that experience in mind, millennials are leading the charge when it comes to side hustles. In a BankRate survey, 48% of responding millennials said they earned extra money on the side.
On average, people with side gigs earn $1,122 in extra income per month, working 12 hours a week. They use those additional earnings to boost their savings, pay down debt, and even afford their regular living expenses.
2. Millennials have one of the highest student loan balances of any generation
Millennials are dealing with unprecedented levels of student loan debt. However, that’s not entirely their fault.
In recent years, college costs have skyrocketed. The College Board reported that from 1989-1990 to 2019-2020, the average cost of tuition and fees at a public four-year university tripled. With such high expenses, millennials have had to take out more in student loans to pay for school.
In fact, the average loan balance for millennials is $34,505. That’s the third-highest average balance for student loan debt. Only Gen-Xers and Baby Boomers have more.
Such a high loan balance affects millennials’ ability to pursue other goals, like buying a home, getting married, or starting a business.
3. Millennial households are earning more than ever before
Despite their substantial student loan debt, millennials have very high earning potential.
According to the Pew Research Center, the median income for millennial households is $69,000. That’s significantly higher than the median household income for all age groups, which is just $61,937.
While that’s good news, much of that higher income goes toward their student loan payments and living expenses, so the economy is not reaping the benefits of millennials’ salaries as much as you’d expect.
4. Millennial credit card debt is lower than average
After watching their families struggle with debt, millennials are notoriously wary of taking on consumer debt themselves. That’s especially true when it comes to credit cards.
Experian reported that consumers carry $6,028 in credit card debt, on average. But for millennials, the number is much lower; they carry an average of just $4,712.
That’s a good decision. Credit cards often have sky-high interest rates. According to the Federal Reserve, the average interest rates on credit cards that assess interest was 16.88% as of November 2019, the last available data. But some credit cards have interest rates of 25% or higher, which can cause you to owe far more than you initially charged on your card.
Keeping your balances low — and paying off your statement balance in full each month — helps you reap the advantages of credit card rewards without paying interest charges.
5. Millennials are delaying home ownership
While previous generations considered home ownership a huge step in becoming an adult, millennials are delaying this milestone.
According to CNBC, the home ownership rate for millennials is eight percentage points lower than it was for Gen X-ers and Baby Boomers when they were in the same age group.
There are a few reasons behind their reluctance to buy:
- Fear of commitment: Many millennials prize flexibility. They want to be able to take advantage of new opportunities that come along, like a dream job in a new city. They feel like home ownership would prevent them from being able to pursue those opportunities, while renting allows them to be more nimble.
- Lack of starter homes: Business Insider reported that there is a massive shortage of starter homes in the real estate market. Baby Boomers looking to downsize and real estate investors making all-cash offers are swooping up available homes, making home ownership unattainable for many millennials.
- Prevalence of student loan debt: With high monthly student loan payments and a high debt-to-income ratio, millennials struggle to qualify for a mortgage and keep up with their payments. Until they pay off a significant portion of their debt — or eliminate their loans entirely — many millennials simply don’t feel comfortable making such a large investment.
Millennials and money: Maximizing your finances
If you’re a millennial with student loan debt and it’s causing you to put off your other financial and personal goals, there are some steps you can take now to improve your situation:
- Create a budget: If you don’t have one already, spend some time creating a budget. Make sure you earn more than you spend each month and look for areas where you can cut back so you can free up extra money to put toward your debt so you can pay it off faster.
- Use your side hustle strategically: If you have a side hustle — such as graphic design, driving for a rideshare service, or delivering groceries — set aside your earnings solely for debt repayment. By using your extra income to make additional payments, you can pay off your student loans months or even years ahead of schedule — and cut down on interest charges.
- Refinance your student loans: To pay off your student loans even faster, consider refinancing your student loan debt. With this approach, you consolidate your loans together by taking out a loan through a lender like ELFI. The new loan has different repayment terms; you could even qualify for a lower interest rate, helping you save money over time.
If you think that student loan refinancing sounds like a good idea for you, use ELFI’s Student Loan Refinance Calculator to get a rate quote without affecting your credit score.*
*Subject to credit approval. Terms and conditions apply.
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