As millennials toss their graduation caps this summer and hope to soon land their first jobs, they will face managing their finances while in the red.
According to a recent Wells Fargo study on millennials, 54 percent say debt is their “biggest financial concern currently,” surpassing day-to-day expenses. Forty-two percent say their debt is “overwhelming,” double the rate of baby boomers surveyed for comparison.
And while most consider themselves savers, 51 percent are putting off saving for retirement until their 30s.
We wish they wouldn’t wait. In our business, we believe in the value of regular, disciplined saving no matter the level and at every age. We also believe that starting out young on a savings journey is crucial. For this generation, saving shouldn’t be an either/or option. It’s crucial for millennials to manage their debt today and start saving for the future.
Millennials disciplined at saving early, regularly and as much as possible can greatly benefit from the power of compounding. It can help them create a more confident financial future.
In our study, millennials talked about the barriers they face when it comes to saving. For 87 percent, they literally don’t have enough money to start saving. Another 81 percent are focused on first paying down their debt.
About half say they aren’t very confident in investing in the stock market for retirement, but many are already in the stock market through an employer-sponsored plan. In fact, 72 percent who are saving said they are in a 401(k) plan.
Perhaps these young adults have watched their parents lose big in the stock market. This has created a lasting imprint, which is understandable. Still, we need to remind this generation that because they have time on their side, they are better positioned to ride out the highs and lows of the stock market.
This generation, like others before it, needs to set aside time to learn about investments and draft a retirement savings plan. Millennials need to take ownership of their finances to build a foundation for a more secure retirement.
We’re hopeful that millennials will be able to thrive, despite the economic odds they may face. It’s time for this generation to translate its optimism into action by taking some basic steps to build a financial foundation.
* Begin saving as you pay down debt.
* Create a retirement road map, either online or with a financial adviser, to set clear goals for saving and spending to accumulate enough for your future. If you’re saving in an employer-sponsored retirement plan, consider setting annual automatic increases to ensure this remains a priority.
*Invest a small amount in the stock market to potentially give yourself a clear picture of how compounding returns help as you build finances for the long term.
Ultimately, the key for millennials is to put a financial plan into action, so their beliefs become a reality.
Marc Daner is managing director-investments for Wells Fargo Advisors.
