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How to Attract and Retain Millennials
The Financial Struggles Unique to Millennials
The millennial generation includes anyone born between 1981 and 1999, and unfortunately, this generation has to deal with a number of financial struggles that no other previous generation has worked through. The main reason for this is millennials grew up or entered the workforce during the 2008 financial crisis.
Analyzing the 2008 Financial Crisis
The 2008 financial crisis was the worst economic disaster since the 1929 Great Depression. The first indication that the economy was facing collapse happened in 2006 when housing prices started to fall. Initially, real estate companies thought that this would result in the exhausted housing market returning to a sustainable level. However, what they were not aware of was the large number of homeowners with questionable credit ratings.
Many banks had permitted people to take out loans for more than 100 percent of the value of their new homes. The underlying cause of this problem was the 1999 Financial Services Modernization Act, which enabled deregulation of the financial industry and permitted financial companies to invest in each other’s businesses.
The 2008 financial crisis cost the U.S. more than $22 trillion. Over a decade later, this financial disaster is still affecting millennials. Unlike their grandparents, who enjoyed economic stability during most of their lives, millennials have had their formative years impacted by one of the most severe financial crises in history. This event is still having an effect on millennials’ finances and how they make important decisions about their futures.
The Rise of the Gig Economy
During the 2008 financial crisis, almost 9 million American workers lost their jobs. By the end of 2009, the unemployment rate had reached 10%. Students who graduated in 2008 and 2009 were struggling to find employment. In contrast, today unemployment is at its lowest in almost half a century. The 2008 financial crisis and the popularity of the internet led to the creation of the so-called “gig economy”. The gig economy represents a shift in the way people work. Instead of working full-time for a single employer, many employees, particularly millennials, take freelance, temporary or part-time employment. Gig work has its advantages, such as flexible hours and workplace, as well as greater independence and a variety of jobs. However, it also has disadvantages since part-time freelance workers do not receive benefits and are often paid at a lower rate than full-time employees. Millennials who have to resort to gig work can often find their financial burdens even more difficult to meet.
Millennials’ Unique Financial Struggle
Even though millennials benefited from a 67% increase in salaries since 1970, this rise has not kept up with rising inflation. In addition, many millennials are burdened with student debt, which means they are struggling to catch up with lost income and are finding it difficult to save for housing and retirement. Here are some of the biggest financial struggles that are unique to millennials:
- Student loan debt: Student loan debt is currently higher than ever because college tuition fees have more than doubled since the mid-1980s. This is a crushing financial burden for millennials. The average monthly student loan repayment is $393.
- Increasing home prices: Many millennials have to save longer before buying their first home, partly because of their student debt and partly because house prices are on the rise. Millennials who buy a starter home today will pay 39% more than people who bought their first home during the 1980s. As a result, millennial home ownership is at an all-time low.
- Exorbitant rents: For the many millennials who cannot afford to buy their own home, renting is their only option. And it is costing them a significant proportion of their hard-earned money. For baby boomers in the 1960s, the median gross rent was $71, by 2000 it had risen to $602. Adjusted for inflation, that’s $576 and $893, respectively. Today, the median rent is $1,600, which means millennials are spending up to 45% of their income on rent.
- Inability to build savings: Because of their high student debts, and their struggle to catch up financially, it is difficult for millennials to accumulate savings. Most millennials between the ages of 18 and 24 have less than $1,000 in their savings account.
- Caring for aging parents: More and more millennials are having to take care of their aging parents and grandparents. Despite the fact that they are earning less than previous generations, they are spending more on caregivers for their elder relatives.
- Relying on parents for financial help: While some millennials are struggling to find money to take care of their parents, more than 50% of millennials aged between 21 and 37 are in such financial difficulty that they rely on financial help from their relatives. Often, this money is used for essential items such as rent and groceries.
- Finding it difficult to save money for retirement: Even millennials who spend their money wisely are not saving money for retirement. According to financial experts, saving 15% of your income should be enough for a comfortable retirement. However, many millennials are struggling to reach that target. This is not because they are spending frivolously, but because they do not have enough money left after all their other expenses.
How You, as an Employer, Can Help Millennials Financially
Today, 50% of all job applications are submitted by millennials. It’s important that you are equipped to help millennials work within your team. What this means is helping them financially in as many ways as you can. Financially stressed millennials would like employers to help them lighten their monetary burden. Around 43% of millennials say they would like employers to help them save for retirement, and 40% would like help paying down their debts.
As an employer, you can help by:
- Offering benefits and programs: Make available the type of benefits and programs which allow them to save money, such as a Health Savings Account (HAS) which can help millennials save for retirement.
- Offering loan solutions: Offer employee loans for millennials who are going through a financial crisis. This will help to prevent reliance on predatory lenders. For example, TrueConnect provides an easily manageable loan solution which helps employees at no cost to your company.
Many millennials who entered the job market in the aftermath of the 2008 financial crisis are still suffering financially today. As an employer, you can show how much you care about your millennial employees and retain your best young talent by offering financial solutions and benefits, which will help them become more financially stable. Review your benefits packages and consider employee loans as sound investments for the future of your workforce.