Millennials face unique financial challenges and opportunities. Born between 1981 and 1996, this generation navigates the complexities of student loan debt, economic downturns, and a rapidly evolving job market. At the same time, millennials have access to technological tools, investment opportunities, and resources their predecessors never dreamed of.
Economic challenges for millennials
As you will see, many millennials experienced financial hardships that were scarcely felt by baby boomers and Generation X when they were at the same ages.
Their relationships with money are, similarly, different now, with more emphasis being place on being financially healthy and on striking the right balance on living the good life and being financially responsible. This is predominantly a result of the socio-economic environments within which they were raised, grew and the economic stresses endured.
Economic volatility: Many millennials consider economic instability a part of their lives. The Great Recession that rocked the world between 2007 and 2009 had its peak during the growing years of many young adults in the millennials classification, changing their orientation towards money and greatly influencing their choice of professions.
In the UK for instance, belt-tightening measures were instituted as a way of managing this financial crisis, which reduced the availability of many public services and reduced the number of job opportunities. All this was followed in quick succession by the coronavirus pandemic, which sent the economy reeling, and further economic crises in 2020 and 2023.
As the UK, in America the Federal Reserve and many other Central Banks around the globe have also dealt with recessions and policies that saw a decline in interest rates which have had an impact on savings and the recovery of the economy in totality.
The impacts of these economic recessions and recent inflation pressures remain concerns for millennials, as these factors enable them to build everything from a financial safety net to a retirement plan. Because of this, many in the millennial demographic have experienced the cost of living burden, amassing a considerable amount of credit card debt to bridge the gap and contribute to their financial turmoil in the process. This is even worse in the US, where a significant number of American millennials have to deal with expensive medical services or health insurance costs.
Student debt: a lot of millennials were brought up believing that tertiary education was the key to getting well-paying jobs, and so a lot of millennials went out and got college degrees.
But this has often resulted in other millennials going into extensive amounts of student loan debt. The data indicates that the promise of greater income has often been adversely affected by having to pay off large loans, a burden which the earlier generations did not experience to that level. And this debt has lasting impacts on many other important financial decisions and life events like getting a mortgage and saving up for retirement.
Housing and homeownership: The rates of home ownership among millennials are very low and this is especially true for those in the US when compared to previous generations at that age.
In the cutthroat housing markets of the major cities such as New York and London, constant growth of home values against unchanging salaries means that down payments and obtaining mortgages have become quite difficult. And high mortgage rates are creating a recession everywhere, it does not matter where the consumer lives.
The rental market is not of much assistance either as high rents take a huge chunk of a person’s monthly earnings forcing the young population to find it hard to save enough to be able to purchase a home or even invest for that matter.
A 2024 House of Lords report on the housing needs of young people highlights some of the data specific to the UK:
35% of 25- to 34-year-olds in 2017 were homeowners, a decrease from 55% in 1997.
Average property prices in England had risen by 173% (after adjusting for inflation) and 253% in London since 1997.
The proportion of young adults who would need to spend more than six months’ income on a 10% deposit for the median property in their area had increased from 33% in 1997 to 78% in 2017.
Salaries and employment: While millennials are the most educated generation to date, this has not necessarily translated into financial success or full-time employment. Many millennials left education to find themselves in a job market characterized by job scarcity, underemployment, and salary stagnation.“In the wake of the 2008 global financial crisis, unemployment was elevated in many countries, and reached a high of 11.8 percent in the UK in 2011,” Statista explains. “With young workers generally being the most impacted by such high unemployment, millennials bore the brunt of this crisis, and in 2012, there were 1.39 million millennials unemployed.”
However, this picture is slowly changing shape, with lower levels of unemployment coupled with millennials’ adaptable nature.
“In more recent times, millennials were the generation most associated with career advancement, with 26 percent of people in the UK believing millennials would value this over a work-life balance, the most of any generation,” says Statista. “Other traits people associated with millennials were being financially insecure, open to different lifestyles, and a willingness to make lifestyle changes for the environment.”
Student Debt: The average millennial owes $33,000 in student loans.
Savings Trends: About 60% of millennials are saving for retirement, compared to 45% of Gen Xers at the same age.
Homeownership Rates: Millennials delay buying homes, with the median first-time buyer age now 33.
Master the Basics of Personal Finance
Budgeting: A budget is the foundation of financial health. It helps track income, control expenses, and set aside money for goals.
| Budgeting Method | Description | Who It’s Best For |
|---|---|---|
| 50/30/20 Rule | 50% Needs, 30% Wants, 20% Savings/Debt | Those seeking a balanced approach |
| Zero-Based Budgeting | Allocate every dollar to a specific purpose | Detail-oriented planners |
| Envelope System | Cash-only spending in predefined categories | People needing spending discipline |
Build an Emergency Fund: An emergency fund covers unexpected expenses like medical bills or car repairs. Aim for 3–6 months of living expenses.
“The future belongs to those who prepare for it today.” – Malcolm X
Tackle Debt Strategically
Snowball Method: Pay off the smallest debts first for quick wins, then roll those payments into larger debts.
Student Loan Refinancing
Consider refinancing student loans to lower interest rates. However, ensure you won’t lose federal benefits like income-driven repayment plans.
Example Comparison Table: Loan Refinancing
| Loan Type | Interest Rate Before | Interest Rate After Refinancing | Savings Over 10 Years |
|---|---|---|---|
| Federal Loan | 6.5% | 4.0% | $7,500 |
| Private Loan | 8.0% | 5.5% | $10,000 |
Invest Early and Consistently
Employer-Sponsored Retirement Plans: Maximize 401(k) contributions, especially if your employer offers matching. It’s essentially free money.
Individual Retirement Accounts (IRAs)
Roth IRA: Pay taxes upfront but enjoy tax-free withdrawals in retirement.
Traditional IRA: Contributions are tax-deductible, but withdrawals are taxed.
Diversify Investments
Spread investments across asset classes like stocks, bonds, and real estate to minimize risk.
“Don’t put all your eggs in one basket.” – Warren Buffett
FAQ
How much should I save for retirement in my 20s and 30s?
Aim to save 15%–20% of your income for retirement. Start small if needed, increasing contributions as your salary grows.
What’s the best investment for millennials?
A mix of low-cost index funds, employer-sponsored plans, and real estate offers a balanced approach.
Should I focus on saving or paying off debt?
Both are important. Build an emergency fund first, then focus on high-interest debt repayment while contributing to retirement savings.
