According to a nationwide survey of 1,405 individuals, despite half of the affluent millennials carrying credit card debt, actually paying it off comes in sixth on their reported list of financial priorities. For this group, living expenses and related bills are their No. 1 financial priority (88%), followed by saving for retirement (79%), and then debt repayment (77%).
Why Are Affluent Millennials Carrying Debt?
39% of the affluent millennials surveyed come from families who had trouble making ends meet, which puts them at a financial disadvantage right from the start. In fact, those currently carrying debt are also significantly more likely to come from families who struggled to maintain employment (34% vs. 26%) or live within their means (44% vs. 31%). “We are the products of our environment, and family systems influence everything, including money,” explains Erika Rasure, assistant professor of business and financial services at Maryville University, and president of St. Louis Financial Therapy. While family financial struggles don’t always transcend generations, education is key to disrupting unproductive learned habits. Many millennials aren’t well-prepared in that respect, either. “If nothing intervenes and triggers awareness, the chances of someone repeating a negative pattern are very good,” Rasure adds.
Early Financial Education Influences Money Habits in Adulthood
Even millennials who don’t carry a balance wish they had a better foundational understanding of credit cards; 45% of affluent millennials specifically wish they’d learned more about credit cards in high school. “That’s a really pivotal age,” explains Lauren Terzis, a clinical assistant professor at the Tulane University School of Social Work who has studied the intersection of mental health and financial literacy. “You’re driving, you’re starting to work, you need to know how to manage your money.” Unfortunately, many affluent millennials are feeling that lack of early education as they try to fill the gaps and are learning credit lessons the hard way. “If you don’t have that preparation earlier on, what are you supposed to do?” Terzis adds. “Financial literacy shouldn’t be an intervention, it should be preventative.”
The Weight of Credit Card Debt Can Lead to Worse Financial Decisions
The negative impact of credit card debt is substantial, and extends to other areas of financial management, too. Affluent millennials with credit card debt are less confident than their debt-free peers in their ability to manage their own finances. For example, one-third (33%) are shying away from making investments because they don’t trust their own judgment. “Debt is stressful and it can be hard to deal with,” Arevalo says. “It can also impact your performance at work, and even take time away from interpersonal relationships. Instead of living your life, you’re worried about debt.” The guilt and lack of confidence that carrying credit card debt can carry may also intensify big-picture financial concerns. Among wealthy millennials with card debt, 36% worry they will never have a job that offers financial security, compared to 27% of their debt-free peers. What’s more, 33% of those carrying card balances are worried they won’t ever feel financially secure. “Unfortunately, we have a generation that came of age when so many people were struggling financially,” Rasure says. “We are starting to see the implications of the financial tragedies of 2007 and 2008 play out first-hand. There’s an additional psychological layer there that has not been addressed.”
How to Eliminate Credit Card Debt, Stress, and Confusion
Regardless of your age or how much you owe, these simple steps can help you tackle card balances, and set you up for a stronger, less stressful financial future:
Methodology
This survey aimed to identify what motivated particularly saving, spending, and investing decisions for the millennial generation. In order to understand their approach to finance and how their personal financial education has impacted their decisions as adults, we studied respondents who have disposable income to buy and invest, eliminating extreme financial hardship from the reasons they may not partake in the financial system. Working with market research firm Chirp Research in May 2019, The Balance obtained responses from 1,405 Americans, comprised of 844 affluent millennials (ages 23-38) through an online survey and compared their actions and attitudes to 430 Gen X and 131 Gen Z respondents. Affluent younger millennials were defined as those ages 23-29 with a household income (HHI) of $50,000 or more, and older millennials as those ages 30-38 with a HHI of $100,000 or more. The survey’s median millennial income was $132,473, compared to the 2017 median millennial HHI of $69,000. Before fielding the quantitative survey, The Balance wanted to ensure the right kinds of questions would be asked, in language that resonated with the respondents. The Balance worked with Chirp to conduct nine 60-minute 1-on-1 interviews with participants in Birmingham, Chicago, Dallas, and New York City. The interviews focused specifically on the language affluent millennials use to describe experiences managing their own finances, as well as their opinions, beliefs, and attitudes toward managing money and investing.
