Why Some Millennials Can’t Save Money? I’m a huge advocate for budgeting and I think everyone should try to save for retirement as soon as they start their first job out of college. This is probably why my friends are convinced that I’m 26 going on 40. I get it- for most people, talking about budgeting is far less interesting than discussing the new season of Orange Is The New Black. I try to be open-minded and see things from other people’s perspectives, but sometimes I wonder why some millennials can’t save money.
Why Some Millennials Can’t Save Money- Statistics
According to a 2016 article by CNBC, most millennials aren’t doing a great job of saving. Here are the stats according to GOBankingRates.
- “Young millennials” (18- 24 years old): “72% have less than $1,000 in their savings accounts and 31% have $0.”
- “Older millennials” (25- 34 years old): “67% have less than $1,000 in their savings accounts, 33% have nothing at all”
In all fairness, most people have dealt with student loan payments. the average American in their 30s has an average student loan balance of around $34,000. The average American in their 20s has an average student loan balance of around $22,000 (CNBC).
We all know that I’m a huge proponent of a rainy day fund so you’re somewhat prepared for emergencies like car repairs or doctor’s visits. But why is it that some millennials just don’t seem to want to save? Here are 5 top reasons for why I think some millennials can’t save money. *Warning: tough love ahead.
5 Reasons Why Some Millennials Can’t Save Money
Crippling Student Loan Debt
As I talked about before, student loan debt is why some millennials can’t save money. Depending on how much student loan debt you have, it can seem like you’re never going to be able to pay off. I feel like some people have such high student loan debt that they feel like they’re never going to pay it off. When you’re making monthly student loan payments for what seems like forever, it can feel like you’ll never pay them off.
Takeaway: think of your monthly student loan payments as steps you’re actively taking towards financial independence. Take it from Millennial Money Diaries:
The Monthly Payment Type in my book is the worst debt personality. They usually don’t think at all about the amount of Interest vs. Principal they’re paying on a month to month basis and really only see the monthly minimum payment they have to make.
By making just the minimum monthly payment, you’re going to pay a ton of money on interest and chances are, you probably aren’t going to chip away at the principle [amount you actually owe] for a long time. If you’re able to, employ some easy money saving tips and put your savings towards extra loan payments. Sure, it might not be as much fun as taking a spontaneous trip to Bermuda, but it paying off your student loans early will greatly enhance your life.
In case you’re not acquainted with the term “FOMO” it stands for fear of missing out. You can often see this term used when someone posts a picture of themselves at Coachella or at a drop-dead gorgeous vacation destination. Basically, you use the term “FOMO” when someone else is experiencing something that you can’t attend or experience yourself. This fear of “missing out” on what could be a life experience drives many millennials to buy experiences that might not be the best financial decision for them at that particular time of their lives. I honestly think that the constant presence of social media is partly to blame. When you’re scrolling through your social media feed and seeing all of your friends enjoying fun experiences all of the time makes you think, “I want that in my life.”
Using Coachella as an example, the music festival can cost between$627 to over $8,455 to attend depending on how much you want to splurge and where you’re traveling from (Source: Time Magazine). Let’s say that 6 of your friends are going to be dropping $2,000 to attend Coachella. I totally get it, all of your friends are going and it’s probably going to be a fun time. But is that temporary moment of fun worth putting yourself further into debt?
Alright, time for another millennial term “YOLO” which you probably know, but it stands for “You Only Live Once.” This is similar to FOMO, but I find that in my own personal experiences, YOLO refers to spending a large sum of money on something that you can’t afford/probably shouldn’t buy, but you do so anyway with the mentality of “life is short, so what the heck.” Don’t get me wrong, I’m all for indulging every once in a while and spending money to have a higher quality of life. However, buying a really expensive car when you’re barely making ends meet or putting a pricey Europe trip on your credit card to “find yourself” is not a good idea.
Takeaway: Don’t do it! Spending thousands of dollars of money you technically don’t have is not the best financial decision. We all have that craving for adventure sometimes, but stay strong and don’t let your emotions overcome you. YOLO trips are fun, but you know what else is fun? Buying a house and building equity! [Okay, I realize that this statement officially makes me sound like I’m 90].
Upgrading Your Life
One of the biggest personal finance mistakes that I see young adults make is updating their lifestyle whenever they get an increase in income. This is a huge reason why I think why some millennials can’t save money. Get a new job that pays $10,000 more than your old one? Time to upgrade your car and move to a nicer apartment. I totally see the appeal in that- I mean, who doesn’t want nicer stuff? However, if you have the basics covered [like a reliable car and a decent place to live that’s not in a bad neighborhood], then you should strongly consider keeping your lifestyle the same so you can build up your savings.
Treat Yo Self
I’m a huge fan of the show Parks and Recreation- one of the famous quotes from that show is “Treat Yo Self.” Treating yourself is important- saving money is something that requires a lot of effort and you should reward yourself every once in a while. The key words are “every once in a while.” I think the trap that a lot of people fall into is treating themselves all the time. Instead of treating yourself 3-4 times a week to an expensive coffee or buying lunch at work, try scaling that back to once a month. Having something that you can look forward to is also part of what makes the “Treat Yo Self” splurge feel even more special.
Takeaway: This may come off as controversial, but if you’re on a really tight budget because you lost or your job, or if you already blew your budget for the month, consider scaling back the occurrences of Treat Yo Self. If you have consider Starbucks to be a daily Treat Yo Self, try scaling back to maybe ordering that pricey drink once or twice a week.
What are some other potential reasons why some millennials can’t save money? Do you think having a large amount of student loan debt excuses people from pursuing financial freedom?