Millennials face a different financial landscape than previous generations — one in which a single-employer career is no longer realistic and home ownership is often delayed.
They are also dealing with unique challenges like student loan debt, a sluggish job market, stagnant wages, and uncertainty about the availability of Social Security by their retirement age.
One Pew study showed that 32.1 percent of the total U.S. population between ages 18 and 34 are still living with their parents.
But it's not all gloom and doom, as long as Millennials are educated about personal finance and saving — and they avoid some big errors they might be making.
Investopedia recently identified four money mistakes that young adults should try hard to avoid:
1. Failing to leverage their greatest advantage
Time is on the side of Millennials. The oldest of the generation tops out at age 35, so they have more time to build their financial future than the other adult generations. And the reason having decades of life ahead is such a huge deal is compound interest, because of its effect on savings.
But because utilizing compound interest requires taking such a long view, this advantage can be overlooked by Millennials who are focused on more immediate aspects of young adulthood. It's crucial to invest the maximum amount possible as early as possible.
2. Not claiming "free" money
When an employer offers to match employee contributions to a 401(k) retirement account, Millennials should take advantage of this to the maximum allowed - it amounts to free money.
But according to a Vanguard report, about one-third of participants were contributing at below the employer match level. As noted above, over the years, that adds up to a whole lot of missed earnings.
3. Fear of investing
Millennials may be reluctant to risk the market, which can be attributed to the influence of growing up during the dot-com bust and the Great Recession.
With inflation averaging about 2% per year, simply socking away savings in cash is not going to cut it. Left alone, the purchasing power of those cash savings will deplete over time, the person saving would have to amass and save enough extra income to live on in retirement, and more important — their cash savings will not grow exponentially.
As Joanna Pratt, an investing expert at NerdWallet puts it, "a well-diversified portfolio has historically beaten inflation by a meaningful amount."
4. Too much focus on savings
Millennials know they have to put some income aside, and that's great. But some are not giving enough attention to the other part of the equation: income.
By prioritizing income and taking steps to maximize it, whether by acquiring new skills, actively looking for a better job (even if it requires moving), or taking on other work on the side, young people can increase the amount of money they're saving and build wealth to rely on in old age.
This side-hustle, supplementing with multiple income streams, is already happening among Millennials. Whereas they don't count on having one employer through their lifetimes, they don't count on one career, either — Viacom calls this "sidepreneurism."
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