Millennials are advancing steadily into middle age. But statistically speaking, America’s largest generation retains one characteristic of their youth: Widespread dependence on their parents to help pay the bills.
A new survey reveals that even millennials who think of themselves as independent on money matters still hit up their parents for regular, recurring expenses. Of those surveyed, 54% claimed they stood on their own two feet, but when pressed a further 30% of those admitted to leaning on their parents to help cover costs on everything from groceries to car insurance.
The costs being covered by parents
For the most part, millennials aren’t hitting up their parents for cash to cover extravagant, one-off charges like airfare for an Instagram-worthy vacation. Instead, the survey found millennials ask mom and dad for help making ends meet for living expenses, such as the phone bill, food and rent. For example, of the millennials who receive monthly help from their parents, 48% of respondents say the money helps cover the phone bill. A more detailed breakdown can be seen in the graph below:
Besides these day-to-day costs, emergency spending requires a call home for some millennials. About 15% of all survey respondents said they would need help from their parents to cover a sudden $1,000 expense. Instead, most would opt to use either cash or savings, provided those savings weren’t earmarked for retirement in a tax-advantaged account.
Millennial money worries
Dipping into your emergency fund to repair a hole in the ceiling is a good strategy (and a reason why you save), while making a withdrawal from your savings account to pay for a bottle of rosé is not. Unfortunately a staggering 70% of millennials surveyed admitted to using savings to cover non-emergency expenses.
To use a favorite phrase of millennials, “this is problematic.” A savings account can only be drawn upon six times a month via debit card or check (due to federal regulations) and you don’t want to waste one of your six free withdrawals to pay for a pint of Americone Dream. Even worse, the money spent on non-emergency expenses won’t be there when you need it to pay for an unexpected, urgent cost.
Another metric of financial health where millennials could stand to improve is retirement savings. While 58% of the millennials surveyed claimed to save money with either each paycheck or once a month, 44% don’t have any sort of retirement savings account — either a private one or through work.
To be fair, millennials aren’t exactly celebrating these personal finance failures. Approximately 57% said they regretted how they’ve spent money from their savings account, and a little over 36% said that during the past week, they felt anxiety about their finances every single day.
The numbers behind the stress
A significant financial worry on millennials’ minds is not having enough money. While we’re pretty sure everyone, regardless of age, would like to have more money, a recent study by the Federal Reserve underscores that millennials are particularly hard-strapped for cash.
Titled “Are Millennials Different?”, the report found when compared to members of Generation X and Baby Boomers when they were roughly the same age as today’s millennials, the millennials have less means to deal with their financial challenges.
As the authors of the report put it in the conclusion of the report, “We showed that millennials do have lower real incomes than members of earlier generations when they were at similar ages, and millennials also appear to have accumulated fewer assets. The comparisons for debt are somewhat mixed, but it seems fair to conclude that millennials have levels of real debt that are about the same as those of members of Generation X when they were young and more than those of the baby boomers.”
How can millennials do better?
Besides winning the lottery, what else can millennials do to improve their financial situation and rely less on their parents?
“Many millennials are skeptical of the market,” said Dallen Haws, a financial planner based in Arizona. “Although it’s good that they are not investing willy-nilly, it will be very important that they get comfortable with investing to be able to reach their full financial potential.” Read more on how millennials (and everyone else) can start investing with an eye toward retirement.
Millennials should also embrace the power of austerity. That doesn’t mean living like a monk, but it does mean thinking twice (or thrice) about making big-ticket purchases and whether or not they are affordable.
“Without question, the biggest regret amongst millennials I work with is overpaying for a car,” said Rick Vazza, a CFA/CFP based in San Diego. “Some of my most successful young members have happily continued holding on to inexpensive cars allowing them to funnel more money toward travel, retirement funds or a down payment.”