Over this time, I’ve seen some trends – yes, this is a trend and doesn’t apply to every single person – but millennials just don’t know certain things about money. Some are allegorical, some are from conversations with friends, and some are from articles and profiles online.
An remember, a lot of millennials are struggling with a negative net worth – so they need to start understanding these things quick!
Either way, I’d love to know your thoughts – especially if you’re a millennial. Do you know and understand these 10 things?
1. Millennials Don’t Always Know They’re In Debt
This one was a real shocker: according to a recent survey by the Brookings Institute, 28% of students WITH student loan debt thought they had no debt at all. Furthermore, another 25% of all students with student loan debt UNDERESTIMATE the amount of student loan debt they have.
But it makes sense. When I first signed up for my student loans, it went something like this:
- I received an email from the financial aid office that said “Click here to see your financial aid award”
- I went to the financial aid website, clicked the link, and then “Accept Award”
- Scrolled through a few pages of legal stuff I didn’t read, clicked “I accept”
- Suddenly I was $20,000 in student loan debt
If you even think you have student loan debt, you need to figure out what you owe.
If you have Federal Student Loans, you can check your loans using the National Student Loan Data System.
If you have private loans, it’s a bit harder, but you can find out your lenders by checking your credit report using annualcreditreport.com.
We have a free email course to help you if student loans are a problem. Check out our Free Student Loan Email Course here.
2. Millennials Don’t Understand How To Repay Their Student Loans
If millennials do know that they have student loans, most of them don’t know how they can repay them reasonably. Once you graduate, you get a letter from your lender saying, “This is how much you owe each month”. Almost 80% of borrowers take that amount at face value and don’t think that they can change it.
As a result, too many borrowers are simply defaulting on their student loans because they think they can’t afford them. Little do they know that there are a lot of different repayment options available to them.
Check out our Definitive Guide To Student Loan Debt, and learn the different repayment options that you can elect – for FREE!
3. Millennials Don’t Understand Their Health Insurance Options
Health insurance is hard to understand. I mean seriously hard to understand. And there is no eduction on what you should do when it comes to making a health insurance decision. What makes it even harder for millennials is that they are able to stay on their parents insurance until they are 26. In many ways that’s amazing, but come 26, millennials are faced with options that their parents never had to deal with.
Gone are the days of a single great insurance plan offered by employers. Now, millennials face a set of options for insurance, none of which sound amazing: HSAs, FSAs, HRAs, EDCs, deductibles, co-pays, co-insurance, and more. What plan should a millennial get, and what’s right for them.
The other troubling fact is that the insurance companies are typically the only ones providing information.
We have our Graduates Guide to Open Enrollment, which can help answer some basic questions, but there is still a huge knowledge gap here.
Also, you can quickly and easily compare your health insurance options using an online service like Policy Genius.
4. Millennials Don’t Know How To Handle Their Bills
Bills, bills, bills – everyone hates them. But millennials have it worse. They aren’t used to it, and they aren’t good about handling them all the time. Millennials like to handle things in there here and now, not wait for things to be mailed to them and then deal with them. Then write checks and use stamps? Not happening as much as it should.
A recent study found that 25% of millennials are late on at least one payment per year. Experian confirms this with millennials having the lowest average credit score of all generations surveyed – late payments being a major factor in the low score.
The fact is, nobody has really taught millennials a good system of paying bills and organizing their finances. As such, they are having a hard time figuring it out.
5. Millennials Don’t Understand The Power Of Compounding
Ahh, the magic of compound interest. It’s taught to us in elementary school, but most millennials forget it during the most important time of their lives – directly after graduation when they land their first job.
Patrick O’Shaughnessy said it best, “millennials have something special on their side that nobody else has – time.” And that time is critical for millennials who need to save for their retirement. Starting to save a 22 can equate to $100,000s more in retirement compared to people who wait until they are 30+.
Millennials don’t understand this because, while 80% know they should be saving, only 55% are, according to Wells Fargo.
That’s why we created The College Graduates Guide To Investing, which breaks down the process so anyone can start.
6. Millennials Don’t Understand The History Of Money
A second part of the equation as to why millennials aren’t investing is because they don’t understand the history of the stock market and money in general. Millennials look back to recent memory – 2008 – when everything crashed. They saw their parents lose 50% of their retirement savings. They saw millions of people lose their jobs – maybe even they faced a tough job market after graduation.
However, the simple fact is that history shows investing in equities is one of the best ways to build wealth over the long term. Even with the recent crash, the stock market is back at all time highs.
From 1928 to 2013, the S&P 500 returned 9.55%, on average. From 1964 to 2013, that average was a little higher at 9.89%. If you had that money in a savings account, you’re lucky to have earned 1.53% on average. Even less the last 5 years.
The bottom line is that, while recent history has been tumultuous, the long term returns are what millennials should focus on.
Furthermore, millennials need to also remember stories of the Tulip Bubble. When they are excited about things like Bitcoin Cash, Ethereum, and Litecoin, they also need to know how bubbles have worked and use caution.
7. Millennials Don’t Know How To Do Their Own Taxes
This one is frustrating because I hate seeing people spend money for services they don’t need. And taxes is a big service most millennials don’t need.
Millennials can do their own taxes, but many don’t know how or have never tried. For most, their parents did them until they graduated. After graduation, millennials are left to find accountants or tax preparers, unless they try to do them themselves.
Going to a tax preparation service, millennials can expect to spend an average of $146 for a tax return without itemized deductions, and $246 for returns with itemized deductions. That’s crazy, especially when a lot of tax companies advertise free file.
These same millennials could likely prepare their own taxes using software like TurboTax, H&R Block, or TaxACT for less than $80. Spending a little time and learning how to do it will save you $1,000s during your lifetime.
8. Millennials Don’t Understand The Importance Of Follow Up
Follow-up: it’s one of they keys to success in life. Yet so many millennials just expect everything to be handed to them. The entitlement is frustrating, but at the same time it’s harming them monetarily.
A good example are bills and statements. Millennials move – they leave home (address #1), go to college (address #2, #3, and #4), graduate college and move for a job (address #5, #6, and #7). The bottom line is that by the time they are 30, many millennials have had 7+ addresses. But what about the bills and statements? Are they changing their address and making sure that everything is in order? According to Lesson #4 about Bills, they don’t.
Or another example, with a millennial who opened a credit card at a store and used it, but never received a statement in the mail. Did they follow up? No, they just assumed everything was fine.
In all of these situations, the millennials sees their credit score tank, and doesn’t know why. All they had to do was follow up! The bottom line is that millennials need to learn that not everything will be given to them – life’s tough, you have to follow up.
9. Millennials Don’t Know How To Negotiate
Finally, millennials really don’t know how to negotiate. Blame it on American capitalism – millennials were brought up in a consumerism culture where everything had an advertised price and that’s what you pay. There is no back and forth, no negotiating.
But so many things in life are negotiable – big ticket purchases (even in retail stores), cars, houses, salaries, and more.
Negotiation is a huge tactic that most millennials don’t have a clue about how to approach. This is a tough one because the only way to master it is through practice, and millennials won’t because they don’t know they can.
The great thing about today is that there are even services that will help you negotiate your bills using the power of technology. For example, Trim will help you lower your bills for a cut of the savings. That’s a great deal for people who are afraid to negotiate. Check out our Ask Trim review here.
Look – this entire article is a generalization. Not all millennials fall into these categories, and many of these same issues impact older generations.
These are just my observations after helping people for a few years online running a blog that helps people get out of student loan debt and start to invest. There are definitely people ahead of the curve, but there are a lot of people struggling with these things.
The great thing is that many of these issues are really easy to solve with a little education (maybe 15 minutes worth), and some time to execute them (another 15 minutes worth).
If you’re reading this and resonating with some of these things, take action today!
What else don’t millennials understand about money?
P.S. I’m a millennial.