Young Americans are financially stressed
Two-in-five young adults today say they’re living paycheck to paycheck, according to the survey, and one-third of respondents said they’re not saving any money right now because they’re struggling to make ends meet.
One-third of young adults said they’re not saving any money right now because they’re either struggling to make ends meet and pay for immediate expenses like rent, utilities and groceries, or they’re focused on paying down debt.
Adding to that stress, only one-in-three respondents think they could handle an unexpected major expense like a car repair or a medical bill.
These challenges lie at the heart of young people’s YOLO mentality and factor in the 51% of young adults who don’t expect to do as well in life financially as their parents.
However, the survey did find about two-thirds of young adults are trying to build savings — with 31% saving on a regular basis and 34% stashing away money when they can.
As for financial goals, young working adults are mostly focused on saving for emergencies (59%), saving for a long-term goal or purchase like a house or a car (49%) and saving for retirement (36%).
“The sooner young people start saving for retirement, the more their money has time to grow, and the better they'll feel about their financial futures,” Jeanne de Cervens, director of the AgingWell Hub, said in a news release. “We can't have people this early in their careers resigning themselves to thinking they won't do as well financially as their parents did.”
If you’re in the majority of young U.S. workers who don’t expect to live up their parents’ financial standing, here’s how you can get ahead with your finances and buck that trend.
Watch your money grow while you sleep
Manage your money
Consider creating and sticking to a budget that breaks down your monthly income between necessities, wants and savings.
Try to avoid common financial mistakes — such as using credit cards to pay for things you can’t afford or getting loans you’ll struggle to pay back.
If you allow your debts to spiral out of control, it can damage your credit score and leave you in poor standing if you need to borrow more money — which you may need to do at some point if you’re struggling to make ends meet.
Once you’ve covered your debts, you may want to consider parking any leftover money in a high-yield savings account, which will give the funds you deposit the chance to grow.
Alternatively, you could invest your spare change to generate passive income through dividends.
If you’re not confident making investment decisions yourself to help your money grow, there are investing apps and online platforms that will do much of the work for you — and some only require a small investment to get started.
Use tax-friendly investment vehicles
When planning for your financial future, you should consider using tax-friendly investment vehicles like a 401(k) account, if your employer offers one.
A 401(k) retirement savings plan will allow you to steer a portion of your pay into an account where you can invest and grow your money — and get a tax break.
If you don’t have access to a 401(k), you might consider opening a traditional individual retirement account (IRA), where you can contribute pre-tax income and grow it tax-free until you make withdrawals in retirement. You’re allowed to contribute up to $22,500 in a 401(k) and up to $6,500 in an IRA in 2023.
Another option is a Roth IRA, where your contributions are taxed upfront so that your withdrawals are tax-free in retirement. Roth IRAs offer some advantages and flexibility compared to traditional IRAs, but they’re also subject to certain rules and limitations and you can face penalties if you withdraw your earnings too soon.
Some encouraging data from the TIAA survey was that 54% of young adults expect or want to fully retire at a certain point. Almost three-in-four (72%) say they’re saving in a retirement plan – either through their workplace (48%), one they purchased on their own (13%), or both (11%).
The good thing about all of these accounts is they allow you to grow your wealth and put your money to work by investing, giving you needed cash flow in retirement.
Kiss Your Credit Card Debt Goodbye
Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.