'Financial Life' author Beth Kobliner on millennials' money needs
By Jay MacDonald | Published: April 4, 2017
Beth Kobliner’s millennial-geared update to her 1996 best-seller “Get a Financial Life: Personal Finance in Your Twenties and Thirties,” was released April 4, 2017.
Personal finance author Beth Kobliner, who set her wayward Generation X contemporaries onto a healthier financial course in the 1990s with her best-seller, “Get a Financial Life: Personal Finance in Your Twenties and Thirties,” has just unveiled an updated edition geared toward millennials.
While the children of the Great Recession exhibit dramatically different attitudes toward money, debt, investing and retirement savings than their parents, Kobliner’s down-to-earth advice remains both timeless and relevant. A sampling:
Retirement saving: “Think it’s crazy to start saving now for retirement? It’s crazy not to. By waiting until age 35, you end up with half as much as you’d have if you’d started at age 25.”
You don’t need debt to create a sound credit history: “Using your credit card for convenience ... and then paying it off immediately will count toward building your credit history, too. And you’ll pay no interest.”
Life insurance? “Odds are, you don’t need it.”
Here’s how Kobliner cracked the code on smart money moves for millennials.
Scroll down to listen to her intervew on our Charged Up! podcast.
Q: Much of the sound financial advice you presented to Gen Xers 20 years ago in “Get a Financial Life” remains the same in this millennial edition, even though the economic landscape has changed dramatically. What did you notice most in writing the update?
A: It is fascinating. I was in my 20s when I was writing it in 1994-95, I was working for Money magazine and there were no real financial books for young people. In fact, I was told by many publishers, “Oh, people in their 20s and 30s don’t care about money; they’re just having fun so there’s no point.” So it was kind of a big sell to make a point to tell young people that, even if they don’t have a lot of money, they still need to be aware of money. Since then, basically every financial detail has been so upset and turned on its head that young people today do realize they need to pay attention to money; they can’t afford not to.
Q: What money behaviors differentiate millennials from their parents?
A: Young people today are much more financially astute than anyone gives them credit for. First of all, they save more; a 2014 study found that about 70 percent of them have money in retirement accounts, whereas only 65 percent of Gen Xers did. And they’re saving sooner; a study found that they’re starting saving into a 401(k) at age 22, versus 27 for Gen Xers and 35 for baby boomers. So there’s definitely an awareness that if you have a company 401(k), you take advantage of it. I think growing up in the Great Recession and hearing their parents talk about financial issues really has had an impact.
Q: Has it made millennials more frugal?
A: It seems so, given that only 47 percent of millennials have credit card debt versus 60 percent of Gen Xers when they were this age back in the ’90s. When I was in college, you basically could get a credit card by signing your name, and there were those tables on campus and at sporting events. I met a woman recently who said, “Yeah, I walked into a frat party in college and came out with a credit card.”
Q: The explosion of student loan debt in the past two decades would also seem to keep millennial spending in check.
A: Absolutely. Debt load for graduating seniors who borrowed in 1993 was about $12,000, whereas today it’s about $37,000. Huge change. In fact, anecdotally, when I meet young people around the country today, there really is a sense of, “I have a debit card; I don’t have a credit card, and although my parents want me to get a credit card, I don’t want to because I don’t want to get into debt.” Plus, with the passage of President Obama’s Credit Card Accountability Responsibility and Disclosure (CARD) Act in 2009, those campus card tables couldn’t be at the colleges anymore. Unless you talked your parent or an older friend into co-signing credit cards with you – not a good idea, by the way – or you had some sort of income, you couldn’t get a credit card. And I think that’s a very good thing.
Q: Given that millennials are arguably the first generation to grow up surrounded by payment cards, how has the ubiquity of cards-as-cash affected their financial perspective?
A: Millennials are very comfortable with cards, especially debit cards, which are much better because you’re using money you have. Their orientation toward how to pay for things and not spend more than you have is much improved from their parents’ generation.
Q: Millennials also have another distinction as the first generation to grow up with the Internet. What impact has that had on their money skills?
A: Financially speaking, there are some things that they really take advantage of. For instance, in my office, young people have their banks text them to remind them to pay bills. Every time a bill is paid or they’re charged, they get a text. It sort of helps them track their money without having to wait for their monthly statement or go to the bank. They seem much more willing and eager to check their bank balance, just because they’re checking Facebook or Instagram or SnapChat.
[Y]oung people today do realize they need to pay attention to money; they can’t afford not to.
Q: Any downside?
A: It may come as a surprise but young people may not be as good at keeping their financial information safe. One recent study shows that while half of all baby boomers use secure passwords for all online accounts, only a third of millennials do. I was also surprised to learn that 20 percent of millennials admit to using public WiFi to check banking information or pay bills online. All of which may explain why 26.2 percent of millennials have had an online account hacked, compared to the 21.4 percent national average.
Q: We also assume that the tiny house generation has a decidedly different take on the value of homeownership. How might this work for and against them financially?
A: I think we can peg that to growing up around the time of the housing crisis of 2008, when there were just a huge number of people getting in way over their head. I think younger people have grown up in an atmosphere of suspicion and mistrust of financial institutions, and they don’t want to get into trouble like that. The average age now for first-time homebuyers is 33, which sounds quite old. But it goes hand-in-hand with student debt loads and how they’re going to pay that back, and not wanting to get into credit card debt and not wanting to have to take a job they don’t want just to get their benefits and health insurance, which just doesn’t happen anymore. So I think it’s rational to say, “No, I’m going to sort of scale back in these different ways.”
While certainly their parents’ parents have done incredibly well in real estate, they’ve seemed to not do well, so they don’t really have that instinct to buy just to buy. Will they miss out on the next housing boom? Hard to say. But if they’re not buying, maybe there won’t be a housing boom! I actually think that they’re more like their Depression-era great-great-grandparents who embraced the benefits of living a more simple and stable life. I’m really happy to hear that they’re not getting deep into all kinds of debt that they can’t afford.
Q: Speaking of benefits, how has the recent drama surrounding the Affordable Care Act been received by millennials?
A: Whether the law changes or not, it’s really important to get health insurance, period. Even if you’re young, if you travel and have an accident or get sick, that will not only impact your life and the kind of care you’ll be able to afford, but also the lives of your parents and the people who love you. And it’s still the number one cause of bankruptcy. Just make sure to get coverage. It’s very tempting for young people to feel invincible, but if you find yourself in a difficult medical situation, you’re burdening not just yourself but everyone around you.
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