3 Ways Millennials Are Getting Money Right

Making Money

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Millennials, often criticized for their financial decisions, have long been portrayed as a generation that is falling behind. With student debt piling up, housing prices skyrocketing, and many opting to delay significant life milestones like marriage and homeownership, it might seem like millennials are struggling to get their money right. However, a deeper look reveals a more nuanced picture.

While millennials face unique financial challenges, they are also rewriting the rules of personal finance. Shaped by the economic crises they’ve witnessed in their formative years, millennials are developing habits that could set them up for long-term financial success. From advocating for higher pay to saving diligently for retirement, millennials are defying the odds. Here are three ways millennials are getting money right, and how their strategies can serve as inspiration for people of all generations.

1. Advocating for Their Worth: Negotiating Higher Pay

In today’s competitive job market, millennials are proving that they know their worth and aren’t afraid to ask for it. A significant trend among millennials is their willingness to negotiate salaries and ask for raises. In fact, a 2018 report from Bank of America found that 46% of millennials had asked for a raise in the past two years, and an impressive 80% of those who asked received one.

This is a significant shift compared to previous generations. For instance, the report shows that only 19% of Generation Z had asked for a raise, followed by 36% of Generation X and 39% of baby boomers. Millennials are outpacing these groups in terms of advocating for better compensation, and this trend is reshaping their financial futures.

Why Advocating for a Raise Matters

Negotiating pay early in one’s career can have a tremendous impact on lifetime earning potential. The earlier you begin advocating for higher pay, the more compounded the benefits become over time. A modest raise might seem insignificant in the short term, but over the course of a career, it can result in significantly higher lifetime earnings. Additionally, the ripple effect of a raise impacts other benefits, such as retirement contributions, bonuses, and even future salary negotiations at new jobs.

Millennials have been shaped by witnessing the financial struggles of their parents during the 2008 financial crisis. Many saw their parents losing jobs or homes, and as a result, this generation is more keenly aware of the importance of financial security and earning what they’re worth. This has pushed many millennials to adopt a more assertive stance when it comes to negotiating their pay, knowing that a strong start can significantly alter the trajectory of their financial future.

How Millennials Are Breaking the Taboo

Millennials understand that asking for a raise is not only about immediate financial gain but also about demonstrating their value to their employers. Their approach often involves thorough preparation, including researching salary data for their industry, highlighting personal accomplishments, and showing how their contributions positively impact their organization.

Unlike older generations who may have hesitated to ask for raises due to workplace hierarchies or fear of rejection, millennials are embracing the idea that their professional worth is tied to their financial compensation. They are using online resources like salary calculators, LinkedIn, and career websites to gather data, creating strong cases for why they deserve a raise. Many millennials are also willing to job-hop if their current employer doesn’t recognize their value, further demonstrating their commitment to getting paid what they’re worth.

Tips for Negotiating a Raise

For anyone looking to follow in millennials’ footsteps, here are a few practical tips:

Do your research: Use salary comparison websites like Glassdoor or PayScale to understand the average salary for your role and experience level.
Highlight your achievements: Create a list of specific, measurable accomplishments that demonstrate the value you bring to the company.
Know your timing: Ask for a raise after successfully completing a project, acquiring new skills, or contributing to the company’s bottom line.
Be confident, but realistic: Understand that not every raise request will result in the salary you want, but showing initiative can often lead to other benefits, such as professional development opportunities or bonuses.
Prepare for the conversation: Practice what you’re going to say, anticipate possible objections, and be ready to back up your request with facts and examples.

2. Saving for Retirement Early and Consistently

While saving for retirement is a crucial financial goal for most people, millennials are getting ahead by starting earlier and contributing more than previous generations. According to a 2020 report from Bank of America, 73% of millennials are saving, and among those who are, 3 out of 4 are specifically saving for retirement. Even more impressively, millennials who are saving for retirement started at an average age of 24 — earlier than both Generation X and baby boomers, who started saving at ages 30 and 33, respectively.

Why Early Retirement Savings Matter

Starting early gives millennials a significant advantage when it comes to building wealth over time. The concept of compound interest is central to this strategy. By starting to save in their early 20s, millennials allow their investments to grow exponentially over time. Even small contributions made early can result in large returns over the long term, thanks to the magic of compounding.

For instance, if a 24-year-old contributes just $200 a month to a retirement account with an average annual return of 7%, they could potentially have over $500,000 by the time they retire at age 65. On the other hand, someone who starts saving at 33 would need to contribute significantly more to achieve the same result. This illustrates why millennials’ focus on early savings can give them a financial edge as they approach retirement.

Millennials’ focus on retirement savings is not just about contributing early, but also about consistently putting away a higher percentage of their income. For example, a 2017 survey conducted by The Harris Poll on behalf of NerdWallet found that millennial parents were contributing a median of 10% of their annual income to retirement savings. This is significantly higher than the median contributions of Gen X parents (8%) and boomer parents (5%).

Overcoming Retirement Savings Challenges

One challenge millennials face is the lack of access to employer-sponsored retirement plans. According to the Federal Reserve, less than half (46.5%) of millennial households have access to a 401(k) or similar work-based retirement plan. However, millennials are finding ways around this by opening Individual Retirement Accounts (IRAs) or investing in brokerage accounts that offer tax advantages.

Millennials are also more likely to use technology to automate their savings. Many take advantage of automatic transfers from their checking accounts to retirement accounts, ensuring that they regularly save without having to think about it. This “set-it-and-forget-it” approach is helping them build consistent habits and stay on track with their retirement goals.

Another noteworthy trend among millennials is the growing interest in socially responsible investing (SRI). Many millennials want their retirement savings to align with their values, so they are investing in funds that prioritize environmental, social, and governance (ESG) factors. This approach allows them to grow their wealth while supporting causes they care about, such as clean energy or corporate responsibility.

Tips for Boosting Retirement Savings

If you’re looking to improve your retirement savings strategy, here are some tips to follow:

Start as early as possible: Even small contributions can grow significantly over time thanks to compound interest.
Take advantage of employer matching: If your employer offers a 401(k) match, contribute enough to take full advantage of this “free money.”
Automate your contributions: Set up automatic transfers to ensure you consistently contribute to your retirement account.
Diversify your investments: Don’t just rely on savings accounts — consider investing in stocks, bonds, or mutual funds to maximize your returns over time.
Consider ESG investments: If you’re passionate about social causes, explore funds that align with your values while still offering solid returns.

3. Focusing on Credit and Building Strong Financial Habits

Credit scores have become an essential aspect of financial health, affecting everything from loan approvals to insurance rates. Millennials, despite the stereotype of financial irresponsibility, are actively working to improve their credit scores. According to a Bank of America survey, nearly 40% of millennials reported improving their credit score in the past year. Other generations were less likely to report such improvements, with 29% of Gen Z, 36% of Gen X, and 31% of baby boomers saying the same.

Why Credit Score Improvements Matter

A good credit score opens doors to better financial opportunities. With a higher credit score, millennials can qualify for lower interest rates on mortgages, personal loans, and credit cards. This means they can save thousands of dollars over time by paying less interest on borrowed money.

Millennials are using technology to stay on top of their credit health. Apps like Credit Karma, Mint, and Experian allow them to track their credit scores, monitor spending, and receive alerts for any changes in their credit report. This constant visibility into their financial habits is helping millennials build and maintain good credit.

Moreover, many millennials are adopting responsible credit practices, such as keeping their credit utilization ratio low, paying off credit card balances in full, and avoiding unnecessary credit inquiries. These practices not only improve their credit score but also reduce their debt burden, setting them up for long-term financial stability.

The Role of Sacrifice and Discipline

Millennials are also practicing financial discipline, often making lifestyle sacrifices to achieve their credit goals. For example, some millennials are cutting back on discretionary spending, such as dining out or traveling, to pay down debt faster and improve their credit scores. Others are opting for minimalism, choosing to live within their means and prioritize debt repayment over luxury purchases.

In addition to making sacrifices, millennials are leveraging the power of financial education. With the rise of financial literacy content on social media platforms like YouTube and TikTok, millennials have access to a wealth of information that previous generations did not. Many are using these resources to learn about credit, debt management, and smart money habits, allowing them to make informed decisions and take control of their financial future.

Practical Steps to Improve Credit

Here are some actionable steps for anyone looking to improve their credit score:

Pay bills on time: Payment history is one of the most important factors in your credit score, so make sure to pay all bills by their due date.
Keep credit utilization low: Aim to use no more than 30% of your available credit limit to improve your credit score.
Monitor your credit report: Regularly check your credit report for errors or inaccuracies that could be dragging down your score.
Avoid opening too many new accounts: Each credit inquiry can temporarily lower your score, so be strategic about applying for new credit.
Use credit responsibly: If you have credit cards, pay off your balance in full each month to avoid interest charges and build a positive payment history.

Conclusion

Despite the many financial challenges they face, millennials are proving that they are capable of getting money right. By advocating for higher pay, starting their retirement savings early, and focusing on improving their credit scores, millennials are building a foundation for long-term financial success. These habits, coupled with their willingness to embrace technology and make smart sacrifices, offer valuable lessons for people of all generations.

Whether you’re a millennial or from an older or younger generation, these strategies can serve as inspiration for how to approach your finances with purpose and discipline. By taking a proactive stance, making informed decisions, and staying focused on long-term goals, anyone can follow in the footsteps of millennials and secure a brighter financial future.