To say that Millennials do things differently than any prior generation would be an understatement. Millennials have their own set of purchasing attitudes and debt issues. Raised entirely on the internet and most of them never having a checkbook or needing to use cash, they have differing attitudes about incurring debt, saving and borrowing.
According to recent debt-related data by personal loan companies Winnipeg, Millennials are pushing the bankruptcy limit more than any other age group in history. Many are cash poor, due to high student loan debt and the lack of employment opportunities in a stale workforce. The uptick in debt has increased as much as twenty percent in just the past five years, making many personal loan companies nervous about repayment and delinquencies.
The biggest problem is that the Millennials who are financially suffering the worst are the ones who have taken on bigger mortgages than they can likely manage. Many real estate agents admit that they get nervous when they see a Millennial walk through the door. Driving the problem in this age group is the ease with which they can borrow money. Things like credit cards and payday loans are tanking their savings and giving them cash that they don’t have the means to repay.
Also driving the personal loan risk of Millennials in Canada is the lack of financial education. Once taught in secondary schools, financial education is now all but nonexistent. That is causing a financial future that is anything but stable and reliable. Another issue at the heart of the Millennial problem is that they have very little concern about carrying debt or what it can do to their financial future.
When surveyed, as many as 31 percent of those between 18 and 30 admitted that they simply aren’t concerned about the high balance of a credit card. Even more concerning is that for Millennials, those who own homes have the least amount of funds in their emergency accounts — if they even have one. Recent data shows that they have less than a $3500 safety net if something happens before they end in financial ruin.
Reports released by the Bank of Canada estimate that the reason that the average household debt continues to increase so sharply is that the number of households that were headed by people under the age of 45 has gone from four to fourteen percent in just two years.
Since Millennials are no strangers to debt, they often don’t stop the bleed and only make it worse by seeking out personal loans like payday loans and credit cards to compile their debt. They use one debt tool to pay off another, only further digging themselves into a financial hole that is nearly impossible to recover from.
It isn’t uncommon for younger people to borrow money knowing that they don’t have the means to repay it. It’s a means to an end; their borrowing habits involve kicking the proverbial can down the road hoping to find a way to eventually clean it up. The problem is that they don’t have a clue about high-interest loans and how they are almost entirely impossible to overcome.
Many who are looking to take out a mortgage have no problem looking when they are already $20-30,000 in debt. Because they don’t know how to finance, their parents are giving them the down payment and then once they take out the mortgage, they are completely unprepared to make the payments. That is getting many in trouble and leading to mortgage bankruptcies.
Statistics indicate that many Millennials are carrying about half of their monthly income in mortgage debt, which leaves them robbing Peter to pay Paul and not seeing an end in sight. Making it only worse is the fact that since property prices are increasing, it is leading to higher home equity values, which allows them to take out more loan debt. If prices drop soon, they aren’t only going to be losing their equity; they are going to have a hard time making their monthly payments, because it will likely adversely affect the entire economy.
Millennials are different in many ways. Instant gratification is all they have ever known, and with the lack of financial education, their generation is just ripe for financial fallout. To get their finances under control, personal loan institutions would do well to protect themselves by being more stringent on lending practices, especially within this age group.