Depending on how you look at it, being a millennial can be a blessing or a curse these days. The youthful generation is full of optimism and has several decades to grow their wealth. On the other hand, they are entering the real world with record amounts of debt and trying to build a career in one of the worst labor markets in history. If millennials aren’t careful about their financial decisions, they could become known as the lost generation.
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The first major obstacle hindering millennials is student loan debt. According to a recent study by Fidelity, 70 percent of the class of 2013 graduated with debt, averaging $35,200 each. Half of graduates were surprised by how much student debt they accumulated and would do things differently if they had thought about the debt load ahead of time. In fact, 52 percent said they would have researched more scholarships or grants, while 48 percent would have started saving earlier. Twenty-four percent of respondents said they would have opened a dedicated college savings account in order to help them prepare for the financial burden.
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Nearly all recent graduates plan to pay back their student loans through their primary job, but simply finding a well-paying job in a related field can be difficult. Last year, a study by consulting firm McKinsey & Co. revealed that 45 percent of graduates from a four-year public college said they were in jobs that do not require a four-year degree. The retail and restaurant industries were among the least desired fields for students, but they end up employing four to five times the number of graduates who said they actually wanted to work in those industries.
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“One of the biggest challenges I see facing millennials and the younger generation is the different set of circumstances for getting into the workforce,” said Bob Gavlak, a certified financial planner and wealth adviser at Strategic Wealth Partners, in an interview. “The older generations didn’t come into the workforce with this much debt, which is a factor of school loans and the cost of an education. Millennials are coming out of college and they have anywhere from $20,000 to $100,000 in student loan debt. They’re immediately starting off in the hole and trying to prioritize their dollars.”
Even millennials who have managed to escape the pitfalls of debt and the labor market are struggling with the side effects of the financial crisis when it comes to investing for the future. With the financial meltdown still fresh in memories, many millennials are shying away from stocks. Cash accounts for 52 percent of the average millennial’s portfolio, compared to only 23 percent for other investors, according to a recent report from UBS Wealth Management. Millennials believe saving is the best option for their money, and only 12 percent said they would invest found money in the stock market. These findings make millennials the most worried of all generations.