This Week in Your Wallet: Millennial Mentalities and Generation Generosity
This week I’ve been thinking about (read: worrying about) the Millennials. Not just the ones in my own family, but the generation overall. The folks at the National Endowment for Financial Education have funded a six-year longitudinal study of more than 2000 college grads. They found that half still depend on their parents for financial support despite the fact that half (of them) are employed full time. The upshot? They don’t value the same things earlier generations did at their age. Some 28% say marriage is not an important life goal; 27% say the same about having kids. Nineteen percent say owning a home is not a priority; And 16% believe living independently is not all that.
Where does this shift come from? Living through the Great Recession certainly had something to do with it. Another report on Millennials out this week from Wells Fargo says eight in 10 members of this generation say the recession taught them to save “now.” (In reality, only 55% are actually putting money away for retirement; 45% are not). But it also clearly has a lot to do with student debt. Having to make a fat student loan payment each month has been shown to delay the onset of what we tend to think of as “adult life” – buying homes, getting married, raising kids and the like.
So I was very excited to hear President Obama announce the availability of income based repayment to another 5 million student loan borrowers. Here’s the lowdown…
In the news
In an effort to expand on his “Pay as You Earn” program, President Obama signed a memorandum yesterday that would allow more Americans to limit their student loan repayments to 10% of their income. Before yesterday, the program only applied to students who started borrowing after October 2007. Obama’s memorandum would widen the eligibility to people who started borrowing before October 2007. Need a refresher on how the program works? Here’s your cheat sheet: After opting into the program, your payments will be based off of your income – and after 20 years (of making payments) you’ll be off the hook for the remaining balance. For those working in public service positions, your remaining balance will be forgiven after 10 years. For more on today’s headline, head here.
Generation Generosity
Another group making headlines in the world of student debt is America’s grandparents. Fidelity Investments is referring to them as “Generation Generosity,” and here’s why: Over half (53%) of grandparents are saving – or plan to save – for their grandchildren’s educations, according to research from Fidelity. Moreover, this group anticipates putting away an average of $25,000 – and 35% expect to contribute up to $50,000 or more. Why are grandparents stepping up the savings (72% say it’s important to help)? Many say it’s a family responsibility, and they’re encouraged by the idea of their loved ones without student debt.
Interestingly, when I took this news to Twitter last week, a couple of you didn’t like the sound of it. For example, @RedTapeChron writes: Socially, this is a disaster. Fuels education inflation, perpetuates class structures. @A_Trusov adds:…personal observation in my extended social circle – parents *expect* gparents to contribute and don’t make savings a priority.
Personally, I don’t feel it’s the responsibility of a grandparent to help – there should be no familial pressure. Wanting to help, if you’re in a financial place where you can afford to do so without sabotaging your own retirement, is another matter entirely. But clearly, that is not something many grandparents are in a position to do. CNNMoney noted 47% of grandparents are also worried about being able to save for their retirement.
Keeping miles in mind
Have you ever dared to do the math on how much your daily commute costs you? This woman did, and found that her five-hour roundtrip commute, five days a week, has cost her roughly $43,000 over the past four years. And this doesn’t account for oil changes, repairs or the value of her time. Now, her 2.5-hour commute is notably longer than the national average of about thirty minutes. But 10.8 million Americans (including those in my house) do travel over an hour each way to work. And 600,000 endure “megacommutes,” traveling at least 90 minutes and 50 miles each way, according to the Census Bureau. So as Reuters puts it, your commute is probably costing you more than you realize – in wealth, health and more.
Not surprisingly, those with modest incomes pay a higher fare for commutes than folks with higher salaries. Commuting costs for the working poor burn off 6% of their income. (It’s an even higher percentage if you don’t carpool.) This can be double the percentage for people with higher salaries. As for your health, Gallup found the longer your commute, the higher the levels of obesity, cholesterol, anxiety as well as pain and fatigue. All around: NG. If a move closer to work (or a fuel-efficient vehicle) is not in your near term cards? Off-set costs by carpooling, taking efficient routes and by all means, deducting any eligible driving expenses. For more, head to Reuters.
Eat green, save green
An apple a day keeps the doctor away, and a carrot a day will keep spending at bay. Or make that any vegetable, really. As DailyFinance reports, eating greens saves you green. The reader’s digest version: Invest in your health now so that you’re not paying astronomical prices for health-related issues in the future. But also save money now by buying veggies over other food staples that are donning higher price tags (i.e. beef, pork, and coffee). For lower prices on produce, shop locally, buy seasonally and don’t fear the freezer. Buy in bulk, chop and freeze. Maybe even consider growing your own.
Have a great week,
Jean
