According to a USA TODAY/Bank of America Better Money Habits poll, one in five millennials haven’t started saving and three in ten don’t even have savings accounts! The truth is that today’s twenty-somethings aren’t as careful with money as they should be. Bad money habits are quite easy to fall into, especially when a) you’re in your 20’s, b) feel like you still have most of your life ahead of you and c) think that mistakes won’t be as costly now as they would be when you are middle aged. Some of the popular habits are spending too much, saving too little and getting into debt. Saving money for long-term goals is no better. A survey found that more than half of millennials have no retirement savings – probably a result of thinking retirement is still a long way away. These are some of the worst money habits of millennials – some of which I am guilty…ironically.
- Relying too much on parents for money: More than a third of millennials (aged 18 to 34) are still receiving some financial support from their parents and one in five still live at home, without paying any form of rent. This poor money habit is in spite of popular feelings that parents aren’t obligated and shouldn’t have to support grown children financially. A generation ago, seeking financial assistance from parents at this same age range would have been seen as embarrassing, but today, most millennials who receive financial support from their parents have friends who receive the same help and see no problem with discussing it openly with their peers. Getting a well paying job is a necessary first step, but when you start getting a steady income, it’s best to find means of creating wealth and then free your parents from the extra burden of supporting you financially.
- Having too little savings – Or none at all: This is another one of the poor money habits popular among millennials. It may seem obvious to many that saving for the future should be started as soon as one can, but knowing you’re supposed to save and actually saving are two very different things. If you’re wondering where to start, retirement savings are always a good option. There are several retirement savings plans you can take advantage of to secure your future. One major obstacle to saving that millennials face is the YOLO philosophy. The school of thought that since you only live once, you should enjoy life while you can and live in the now is one that could spell disaster for their financial future.
- Not having emergency savings: Recommendations by financial experts are to have about six months of your regular living expenses saved up. Things like your rent and other miscellaneous bills make up these regular living expenses. This is to prepare you for any unbudgeted expenses, emergencies or the event that you lose your job. Having an emergency fund could also help you form the habit of saving even when you don’t have a major expense in the near future. The more you save, the harder it will be to go back to your bad money habits. Saving also means that on a rainy day, you won’t be running helter skelter to friends, family and lenders looking for financial help.
- Spending like your peers – Even when you can’t afford it: A shocking three quarters of millennials use the spending habits of their friends to determine their own. Peer pressure is real and the desire to feel like you belong is a major influence to millennials’ lifestyles. Living in a cool neighborhood, using the smartphone that’s in right now and wearing the latest trends are not necessary to feel fulfilled – especially when you know that such profligate spending is far above your means. One rule of spending that wealthy people use to curb most bad money habits is to always make more than you spend – way more. That way, saving for a rainy day is possible and so is investing. It also builds character and prepares you just in case you encounter a rough patch and have to live on the essentials till you get back on your feet.
- Not tracking your spending: Budgets are the answer to several bad money habits. Several millennials don’t take the time to monitor their spending, sometimes out of fear that they’re spending more than they should – which they are, most of the time. Budgets are unique to the individual they’re made for and so should be modeled to fit the peculiar needs and income of the subject. One good tactic to use when making budgets is the millionaire’s formula. Warren Buffet said, “Do not save what is left after spending, but spend what is left after saving”. This way, you make sure you have a preset amount of savings and avoid overspending.