As a Millennial (at 25, I can’t possibly claim another generation), I’ve grown tired of the trite adjectives being used to describe my demographic of Americans. We’re generally called a narcissistic, lazy, over-indulged, entitled group of underachievers who were crippled by too many participation trophies and ran home to Mom and Dad after college graduation.
Some of my peers may still be holed up at Mom and Dad’s, unable to face the potential rejection associated with finding a job and growing up. But many of us are in the process of phasing out of the Peter Pan syndrome. An integral part in the process of becoming an adult centers around understanding and properly using money.
Save a percentage of each paycheck. Live below your means. Plan for retirement.
These are all pieces of advice thrown at young women and men, as they strike out on their own. It seems like this advice would fall to register with a generation known for self-centeredness and indulgence.
Millennials aren’t completely failing
According to our recent survey, MagnifyMoney discovered millennials* are the most likely to save money when compared to Generation X, boomers and seniors. 74.8% of millennials surveyed saved money each month. No need for a participation trophy here. Millennials placed first outright.
While tucking away money to build a nest egg is part of the foundation towards financial health, saving alone doesn’t make us financially fit nor does it guarantee wealth in the future.
Millennials’ costly mistake
39.5% of millennials go overdraft and incur the fees associated with this costly mistake. On average, millennials go overdraft 2.7 times in a year and pay $101 in fees. Unlike other generations, millennials cite forgetfulness as the main reason for going overdraft (as opposed to a lack of funds).
The simplest fix would be for the young generation to do a better job of paying attention of their account balances and not make any purchases without sufficient funds. But taking the time to whip out a smartphone and login to your bank app (assuming you even have one) before making a purchase appears to be too cumbersome. The other option is to find a financial product that offers protection for when you inevitably make a mistake with your money.
Embracing the path to reduced fees
Traditionally, overdraft protection doesn’t entirely protect you from paying a fee. Banks can still charge an overdraft, transfer or non-sufficient fund (NSF) fee. If you link your checking to a savings account, the bank may charge you $10 to $12 to transfer money out of your savings account to cover the overdraft. Even worse, linking a credit card to cover an overdraft could result in interest automatically accruing at rates close to 30%.
Instead of sticking with the status quo when it comes to banks and their fees, millennials have started to eye another option.
Internet-only banks offer more than just real overdraft protection (for no added charge), they provide lower fees and much higher interest rates on savings accounts. They even reimburse you for ATM fees and save you gas money and time by letting you deposit checks with your mobile phone.
Millennials have already started to embrace the idea of Internet-only banks with 55.1% considering an online account and 18.8% already making the switch.
Handling the debt factor
Coverage about the Millennial Generation’s issue with debt has become as ubiquitous as the name-calling and stereotyping. Student loans are often the focus of the millennial debt issue, but our survey found 39.5% of young Americans carry $8,864 in credit card debt.
Unfortunately, most millennials carrying credit card debt are also paying more than a 15% interest rate. A high interest rate can cripple the debt repayment process, incurring thousands of dollars spent in interest instead of chipping away at the principal debt.
Instead of throwing away money on interest, some millennials turn to a balance transfer to reduce their interest rates. Our survey indicated that millennials, at 80.9%, have the highest success rate in paying off their debt during the balance transfer period. A whopping 93.6% of millennials would use a balance transfer again (but we hope they don’t have to).
The Millennial Generation’s ace in the hole
Millennials may be ridiculed in the press and the target of jokes about work ethics and becoming independent, but the MagnifyMoney survey shows they’re doing all right when it comes to their finances. And lest we forget, millennials have the distinct advantage their elders don’t: time to fix their mistakes.
Find other details about our MagnifyMoney survey here.
*Millennials were identified as women and men between the ages of 18 and 34.