Are Millennials Financially Savvy?

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Reports describing the financial health of Millennials usually strike a cautionary tone. This generation—commonly defined as people ages 18-37—often is described as weighed down by debt, saving too little, and investing too conservatively. So it was somewhat surprising to read the results of Schwab’s latest survey, which painted a more optimistic picture.

Among the study’s highlights:

  • Nearly one-third (31 percent) of Millennials said they have determined their financial goals and have a written plan. By contrast, just 20 percent of Gen Xers (ages 38-53) and 22 percent of Baby Boomers (54-72) said the same.
  • Millennials are also more likely than their older counterparts to have specific savings goals, work with an investment advisor, and, among those who invest, regularly rebalance their portfolio.

Of course, all is not perfectly well on the Millennial money front. They do, in fact, have a lot of debt. According to a separate study by , about 75 percent of Millennials have debt—mostly credit card balances and student loans, with 25 percent carrying over $30,000 of debt and 11 percent trying to pay back over $100,000.

So heavy is their debt burden that more than half of all Millennials say it has made them put off buying a house, saving for retirement, or getting married.

Debt factored prominently in the Schwab study as well, with 36 percent of Millennials saying student loans make it a challenge for them to save money—far more than Gen Xers and Boomers.

It isn’t just debt getting in the way of Millennials saving for the future. Their long-term savings goals simply appear to be less important to them than near-term spending objectives.

The Schwab study found Millennials to be more likely than older generations to say significant expenditures on experiences (like big vacations) are worth it, even if that spending may delay retirement.

Many Millennials acknowledge that short-term—even indulgent—spending is more important to them than setting money aside for the future. Asked about obstacles they face when trying to save money for future goals, they were more likely than their older counterparts to cite lifestyle items like dinners out and vacations. Other research has found that and that 87 percent say they’re willing to spurge on a nice meal out even if money is tight.

When asked what they’d be willing to do in order to save money, Millennials were less likely than older generations to say they’d be willing to give up shopping at specialty grocery stores or use public transportation instead of a car service such as Uber.

Some Advice for Millennials

If you’re a Millennial, you have an asset that people in older generations wish they had more of—you have time. To make the most of your time, consider taking the following steps.

Plan to succeed. It’s great that you’re more likely than older generations to have a plan for your financial goals, but do you have a plan for your day-to-day cash flow?

Free online tools like Mint.com can help you plan the best use of your income, allocating money for your needs, wants, and future.

Be done with debt sooner than later. Student loans typically are designed with a 10-year payoff. That’s a long time to let such debt hang around. There’s never a pre-payment penalty with student loans, so add a little more to your minimum required payments and ditch that debt as soon as possible. It may motivate you to , finding out how much more quickly you’ll be out of debt if you add another $25, $50, or $75 to your monthly payments.

Put some away. After building an emergency fund with at least three months’ worth of essential living expenses, start investing. This is where the value of time can be seen most clearly, according to Schwab Regional Market Executive Annie Liu: “We always tell clients, “It’s about time in the market, not timing the market.”

Consider this: If you’re 18 and want to build a million-dollar nest egg by the time you’re 70, investing just $71 per month should get you there (assuming a 9 percent average annual return). But if you wait until you’re 28, it’ll take $176 per month, and if you wait until you’re 38 and it’ll take $448.

The Millennial priority of spending on experiences actually demonstrates some financial wisdom. Research has shown that buying experiences tends to be more meaningful and satisfying than buying things. Just don’t spend all of your money that way. The experience of not having enough to live on in your later years won’t be very satisfying at all.