Why Millennials Are Struggling to Build Wealth
Credit Suisse just released their Global Wealth Report highlighting the state of wealth development throughout the world. The report found Millennials are “doing less well than their parents at the same age,” and they explored the factors that may have caused this situation.
Millennials have faced several challenges during their adulthoods: rising house prices, stricter mortgage lending requirements and higher student debt. Millennials now have to pay more money for a higher education, and even with a degree, they struggle to enter a workforce saturated by tenured Baby Boomers. The debt and limited earning potential are greatly inhibiting Millennials’ ability to acquire wealth.
A recent survey from CNBC showed more than half of Millennials believe debt has a negative impact on their health. Douglas Boneparth of Bone Fide Wealth in New York City said, “Buy a house, start a business—we grow up thinking these things are the American dream, and we’re having a very hard time getting to them because we see a lot of this money going towards servicing student loan debt.”
What can Millennials do to fight the statistics? First, they need to focus on their retirement accounts regardless of their home ownership status. Most adults have the mindset of buying a house, then saving for retirement, but that may delay the development of wealth. Renters can invest and save just as much as homeowners, and the sooner they save, the better off they will be in the future.
Furthermore, Millennials must focus on minimizing and eliminating personal debt. Money spent on interest for credit cards, personal loans and car loans could pay down their student loans. Paying off credit cards quickly will increase their credit scores, which will help them obtain lower interest rates when they are ready to buy a home.
Wealth accrual does not always happen in a linear fashion, and may not build at a rapid rate. With time, patience, and practical strategies though, Millennials can create financial security for their future.