Millennials are ‘financially fragile,’ study finds
Plenty of millennials are headed down the wrong path financially, judging by the findings of a new survey.
According to the PwC survey released by George Washington University's Global Financial Literacy Excellence Center, which analyzed the financial behaviors and thoughts of 5,500 respondents between 23 and 25 years old, millennials are ill-equipped to manage financial decisions now and later in life.
"Millennials’ financial practices are of concern because of the potential for these behaviors to become firmly established," the study said.
More than 40 percent of respondents said that in the past five years, they've utilized alternative financial services such as payday loans, pawnshops, auto title loans, tax refund advances and rent-to-own products.
At the same time, nearly 30 percent said they're overdrawing on their checking accounts, and only 36 percent have some type of retirement account.
Other significant findings include:
- More than 20 percent of millennials with retirement accounts took loans or hardship withdrawals in the past year.
- More than half expressed concern about their ability to repay student loan debt.
- Two-thirds of all millennials said they carry at least one source of long-term debt.
- Nearly half admitted they probably couldn't come up with $2,000 if an unexpected need were to arise within the next month.
- Thirty-four percent were "very unsatisfied" with their current financial situation.
The alarming findings came as no surprise to Bruce McClary, vice president of communications with the National Foundation for Credit Counseling.
"Millennials are starting at a significant disadvantage, especially those who borrowed their way through college and have a lot of student debt," McClary said.
Pointing to a $1.3 trillion student loan debt total nationwide, McClary said millennials' choices are very limited right out of the gate, and that's why they're sometimes led to less attractive solutions such as payday loans and auto title loans.
"These decisions that seem good because they're getting the money quickly...might inflict lasting damage that really takes a long time for them to climb out of," McClary said.
McClary said if possible, it's best to avoid borrowing in order to resolve a financial issue. Find a way to effectively budget the funds at hand.