College graduates need to know about savings
Survey shows millennials need better financial education
Ashley Montgomery | 8/14/2014, 9 a.m.
When going into anything it is best to have a well thought out plan beforehand — well, that was so for generation Baby Boomers. The new-aged millennials (ages 18-34) have been doing things a bit differently and by differently that means not-so-well-thought-out.
Nearly 70 percent of millennials have never received formal financial education, according to a recent TD Bank Financial Education survey.
The survey reveals that young adults take less risks when it comes to handling their money.
“Forty-seven percent of millennials describe their financial personality as being cautious when it comes to overall personal finance habits,” the survey stated.
These statistics are frightening. This means that the day after walking across the stage, most college graduates who are thrust into the “real world” have no real understanding of basic checking and savings accounts information, let alone how to start a small business or how to buy a home.
Head of Retail Distribution and Production at TD Bank, Nandita Bakhshi gave three helpful pieces of advice to prepare college graduates for a better future.
PAY DOWN DEBT
Before young adults could even have a chance, they are already entering a nation where student debt reached more than $1.2 trillion last year. According to the Project on Student Debt 70 percent of all students graduating from a four-year
college have student debt, and on the average level is nearly $30,000.
“If they leave college with debt — work toward lowering their current debt without piling on more,” Bakhshi said. “This is where budgeting becomes critical. There are a few purchases they may need to finance, like a car or furniture. But, for the most part, it is important to live a modest lifestyle after college to start reducing debt versus taking on more.”
It’s time to make a relationship status change millennials and not the one with your significant other. . . with your bank. Establishing an early financial relationship will pay off in the long run.
The survey says that 90 percent of millennials prefer to bank online and through their mobile apps (this includes checking balances, paying bills, and transferring money) but nothing beats face-to-face interaction.
“Whether these recent graduates will be looking to gain access to capital to start a small business or plan to purchase their first home, having a relationship with a bank from the get-go will put them at an advantage to be able to obtain financial services they’ll need,” Bakhshi said.
SAVE FOR RAINY DAYS
“You can plan a pretty picnic, but you can’t predict the weather,” Outkast once rapped and that could not be more true. There will always be unexpected expenses that will arise at what may seem like the most inopportune time in one’s life. Creating a budget will leave room for last-minute repairs, travel expenses, unexpected medical bills, etc.
“Young adults should look to maintain an emergency fun, which they can build slowly every month for these expenses,” Bakhshi said. “This will help accommodate for any unforeseen expenses and prevent more debt from accumulating.”
According to a survey conducted by the Pew Research Center, millennials have a much more independent attitude than older generations. Millennials’ attitudes have often been referred to as “materialistic”, “spoiled” and “saddled with a sense of entitlement.” Thanks to social media making the world smaller, many of this generation are caught up in trying to keep up with their peers. That pressure has caused 50 percent of them to use a credit card to pay for basic daily necessities such as food and utilities.
In an American Institute of Certified Public Accountants survey, there are extreme differences between genders, where men feel more inclined to keep up with their friends in terms of material goods while women tend to be more frugal and place a higher emphasis on saving money.
Bottom line, “what you don’t know can hurt you, financially.”