Each year, projections of debt totals for millennials rise. As the cost of a college education rises, as well as the need for a college education for many industries, the student debt crisis has become a phrase heard around the globe.
Northwestern Mutual’s 2019 Planning & Progress Study predicts that millennials accumulate an average of $27,900 in debt. Business Insider says the average American millennial is already behind when entering the workforce and has to rely on family for money and delay life milestones due to student loans and other debt.
With a combination of lower starting salaries, loan payments and a higher cost of living, millennials must take a different approach to spend and saving in their early 20’s. Without the proper guidebook on how to properly save money, college students and recent graduates should take the appropriate steps and plan ahead of time to feel financially secure as they enter the workforce.
According to a 2018 study, one in five students have student loan debt to pay off. Many loan plans allow students to begin paying off debt after they graduate, but then face extremely high-interest rates and begin long-term payment plans. To combat those costly rates and pay debt efficiently, students should consider all the terms and conditions of a loan agreement before committing to it.
John Petosa ’95, Martin J. Whitman School of Management professor of practice and a licensed CPA, recommends that students use an amortization table to understand how much their loan will cost them. As a college graduate, young adults should try not to accumulate any more debt than they have to and understand what a loan will require to pay off on time.
William Walsh ’06, professor of accounting practice at the Whitman School of Management, shares that he believes there is a great deal of discipline for college students to spend and save money.
Along with loan agreements, credit cards are another money borrowing option for students, but can cause even more of a financial burden, according to Walsh and Petosa.
Once students graduate from college, it is best to be as financially secure as possible to begin searching for a job and live independently. This could be done by spending less on simple, everyday items like food, transportation and material goods; small savings can go a long way in the future. Certainly, with an increased cost of living, wages and salaries will also rise, but millennials can benefit from spending less on the little things to save for the big things.
“Walking out of school with student loan and credit card debt is a certain recipe for a difficult start to financial health,” says Petosa.
How early should students think about retirement? For Petosa, it’s never too early to save money to have for the future. Saving practices can benefit someone at any stage in their life to help afford the cost of a home, car or, in this case, student debt.
Walsh agrees that retirement is much farther away for 20-year-old students because Americans on average are working longer. The National Academy of Social Insurance reports that the average retirement age is 66 and rising. So, while retirement may not be at the forefront of students’ minds, attempts to save money during and after college will ensure financial preparedness.
Generally, even with preparation and planning, adults can and will face unexpected financial crises that lead to emergency decision-making about money. Having the fiscal knowledge to expect the unexpected and stay on top of bank accounts is the most effective way for millennials entering the workforce to succeed economically.
If you are looking for financial resources and tips on campus, please visit the Office of Financial Literacy for personal finance coaching and money management events. You can visit the Office of Financial Literacy at 200 Bowne Hall or by calling 315-443-1513.