by Josh Stelzer
There is an increasing amount of attention gathering around the Millennial generations’ entrance (or attempted entrance) into the workforce. This is truly the workforce of tomorrow, yet things will be very different from the experiences of the previous Baby Boomer generation. The common dream of going to college, starting that dream job, starting a family and purchasing a home have all been faded by the current economic climate. While I realize that the majority of our readers are probably not in this generation, the mass majority of you do have children or family members who are.
The current economic condition hasn’t painted the prettiest picture for this generation. Just recently the total student debt for our country passed the $1 trillion dollar mark. This is certainly unsettling when coupled with the latest data by the Bureau of Labor Statistics, showing that Millennials aged 20-24 have a staggering 13.2% unemployment rate.
The most frightening fact of all may be the newly published findings by LIMRA showing that over 56% of people aged 18-34 are not contributing a single dollar to any type of retirement plan, such as an IRA or 401(k). With social security looking like a sunk cost at this point, the burden of retirement income is going to fall squarely on the shoulders of each and every Millennial seeking retirement.
So is this generation doomed? Well, there are a few positives for the Millennials. One high point is that this generation is learning very early in their career, how to cope with uncertain financial times. While settling down, having kids and buying that dream home may be on temporary hold, Generation Y has definitely learned a few valuable financial lessons over the past 5 years. The importance of budgeting, not getting overextended on loans, and managing their future expectations should prove to be a great benefit for young adults over time.
The other main advantage I see for Gen Y is the current entrepreneurial mindset being promoted in our country. More and more people are being forced to find a way to make a living by tapping into their creative side and starting a small business. Starting small businesses not only spurs economic growth, but also provides our generation with a greater potential for reaching the ultimate goal of financial independence.
Ultimately, the success or demise of this generation relies heavily on our mindset. First and foremost, we have to start saving. Setting up systematic contributions to a retirement account is an absolute must, even if you have to start at a very low amount. Contributing just $100 a month at 6% will amount to roughly $200,000 over the next 40 years. While only saving $1,200 a year should not be a long-term strategy, it is certainly a start. Getting into the habit of saving as much as possible for retirement has to be the main focus for our generation.
The most important thing you can do for your children or family is to educate them. Have the conversation about retirement and how they plan to achieve their long-term goals. With virtually zero education on personal finance being offered in today’s schools, it is the responsibility of the parents and close family members to instill these concepts into the Millennials minds.
The last bit of advice is to educate these young adults on the importance of financial planning. Putting your loved ones in touch with a financial planner could be the best thing you’ll ever do for them. We at Snider Advisors are always happy to offer an initial free consultation, to guide your loved ones in the right direction. I challenge you to forward this to those in your life who may be facing the challenges listed above, and encourage them to get the ball rolling toward financial independence. By planning early and taking control of their finances, the members of Generation Y will only increase their chances at success in what has become a very uncertain world.