Benefits of Budgeting for Millennials and Gen Zers
March 17, 2020
At a time in U.S. history when the national debt is at a record high of $22 trillion, the welfare of the country relies on proper planning and budgeting. On a smaller scale, the economic welfare of individuals also requires proper money management, and millennials and Generation Zers have special concerns and needs.
Millennials are those born between 1981 and 1996. This generation came of age during the digital era and are known for their comfort with technology and social media. Millennials currently make up one quarter of the U.S. population and have ushered in one of the biggest societal and cultural shifts in the U.S. because they’re more racially diverse and educated than previous generations. While millennials’ career paths may be much different from their parents’, education still matters: those with bachelor’s degrees are overall more successful and make more money than their high school graduate counterparts. However, millennials currently have the highest levels of student debt, which affects other factors in their lives.
Millennials’ housing situations vary: They were hit by the Great Recession (2007-2009), which led to many having difficulty establishing independence, and they are currently the largest generation to remain living at home for an extended period during adulthood. Millennials also are getting married and having families later in life. As of 2018, only 46% of millennials between ages 25 and 37 were married.
Generation Z consists of those born between 1997 and 2012. While this generation is still establishing itself, it’s the largest, most racially diverse generation — even more so than millennials — in U.S. history. Gen Z currently makes up 27% of the U.S. population. Growing up in the digital era, Gen Zers are likely to have an affinity for technology from early childhood. Some of the oldest Gen Zers are now graduating from college and beginning their careers. Like millennials, they’re also dealing with increasing levels of debt. While about 50% of Gen Zers are aware of student debt, due to the debt of millennials who came before them, Gen Zers still take on student loans and have credit cards.
The metrics about millennials and Gen Zers correlate to an emerging need for financial advisory strategies to navigate the future’s financial complexities. On average, millennials have $27,000 in debt and Gen Zers have $14,700 in debt, according to Northwestern Mutual. While millennials and Gen Zers are more diverse, educated, and technologically advanced than prior generations, their sizes, levels of student debt, housing issues, and employment projections are poised to impact their own lives as well as society. Many financial challenges face both generations, but sound financial advisory tactics and the benefits of budgeting can help them to build comprehensive savings strategies.
Individuals interested in developing the skills needed to provide critical guidance to these generations should consider an advanced degree in financial management. Potential students can look into Maryville University’s online Master of Science in Accounting program. With courses such as Financial Accounting, Data Analytics, and Survey of Business, the curriculum can help students to develop financial management skills, understand the benefits of budgeting, and develop effective strategies for each generation.
Benefits of Saving Money
While the concept of budgeting can sometimes be negatively associated with a lack of money and the need to pinch pennies, it can actually be a positive long-term method of building wealth.
Some individuals have specific budgets that enable them to just barely pay the bills, while others put money aside with every paycheck. Developing a money-saving strategy can help to minimize the financial burden that can come with emergencies or unexpected job loss. Having a savings account or an emergency fund can be beneficial in a time of need. When cars break down or family members get sick, an emergency fund can protect against financial disaster.
Putting aside money with every paycheck can also demonstrate the long-term benefits of budgeting. Individuals can strategize how much money they want to save and deposit into a savings account each month. Doing this can help them meet long-term goals, such as financing advanced education, homeownership, and retirement.
Education can be one of the most important investments individuals make in their lifetime. Earning an advanced degree can offer expanded career horizons and higher salary potential. However, if students don’t allocate their money and apply for scholarships, they can end up in significant debt. After graduating and finding a job, students can begin building their careers and saving.
One of the benefits of budgeting can be homeownership. To put a 5%-20% down payment on a house, individuals need to diligently save money. Some government-backed loans require a down payment of as little as 3.5%, but that can still run into the thousands of dollars.
After saving a significant amount of money in a savings account or an emergency fund, individuals can place the money in a retirement fund, such as a 401(k) or a Roth individual retirement account. The benefits of budgeting can ultimately provide long-term benefits and improve overall quality of life.
Budgets for Teens
Individuals are never too young to begin implementing budget strategies into their daily lifestyles. While Gen Z teenagers may not yet have jobs, their parents can model budget techniques and teach their teens to value money. Parents can implement several strategies to teach teens money-saving tactics before teens fully enter adulthood. By doing this, teens can learn the benefits of budgeting from an early age.
Before teens begin working, they can practice putting aside their allowances. The strategy can teach teens how to save for small or large purchases. Saving money for their own books; football jerseys; guitar lessons; video games; concert tickets; and other products, services, and events can teach teens to value their money. As teens get their first part-time jobs, they can begin their saving habits. They can also work side jobs like dog walking and babysitting. Recording a monthly budget can help teens to determine how much they want to save and spend.
Gen Z teens can begin paying for their own clothes and eating out with friends. While parents still financially support their teens, they can let them explore paying for some things. Teens can also learn the benefits of budgeting by saving to buy their first car or starting a college fund. By earning and saving money, Gen Z teens will develop a greater sense of accomplishment and value for their belongings.
Budget Apps for College Students
As Gen Z teens transition to college and become young adults, budgeting becomes an even more vital aspect of their financial lifestyles. Young adults should create weekly or monthly budgets to fully understand where their money is spent. The following budget apps may be helpful for college students:
While in college, Gen Z students can also begin incorporating emergency and retirement funds into their budget plans. Individuals going to a college or university can integrate tech-driven tools into their budget strategies. Many apps can help students to learn how to allot funds for various components of the college experience. These lessons can carry over into budgeting for various aspects of adult living, such as setting aside money for bills and groceries. Many college students becoming young adults begin paying their own car insurance, phone bills, groceries, and rent, among other expenses. Effective budget strategies, whether on paper or through apps, become necessary for individuals to effectively pay their weekly or monthly expenses.
Budgeting Tips for Young Adults
Younger millennials and older Gen Zers transitioning from educational surroundings to professional environments can regularly practice saving money for the future. Young adults who’ve received an education and are ready to make important life decisions regarding homeownership and retirement will begin to see the benefits of budgeting. The importance of financial literacy becomes real for young adults as they begin to pay off student loans, purchase a car, or put a down payment on a home.
One of the best ways young adult Gen Zers and millennials can effectively budget is by making it a habit. Whether they create a budget once a week or once or twice a month, consistently budgeting will help them better manage their finances.
Another tip for young adults is to avoid spending more money than they make. While having credit cards and building a good credit score can help Gen Z young adults and millennials secure car loans and home mortgages, they can also create financial problems. Young adults often find themselves in credit card debt. According to Financial Advisor, as of 2019, 36% of college students and young adults have more than $1,000 in credit card debt. Young adults should make a habit of paying cash or using debit cards, only spending money they have.
Another way young adults can experience the benefit of budgeting and saving money is by becoming more financially literate. Gen Z young adults and millennials should begin building an emergency fund. They should also be actively putting aside money for the long-term future, investing in a 401(k) plan or a Roth IRA account. Young adults can also make other investments, such as the stock market.
Budgeting Tips for Young Families
The dynamics of budgeting may change for older Gen Zers and millennials in the wake of life experiences such as marriage and having children. While marriage can bring a second income into the picture, other marriages rely on one income. As couples come together in marriage, they can establish short- and long-term budget goals. Young couples will also see the benefits of budgeting as they prepare to have children. The average family spends $13,000 per child every year, according to the U.S. Department of Agriculture. When parents commit to having children, they also commit to having a baby budget.
Parents need to have a proactive plan for child-related costs, beginning with maternity leave. A family that relies on two incomes needs to factor in how much time the mother will take off from work to take care of her baby. It can be beneficial for parents to meet with a financial adviser before a baby is born to discuss prenatal care, hospital costs, medical costs, and health insurance premiums. Parents can also implement the 50/30/20 rule in which they spend 50% of their income after taxes on their needs, spend 30% on activities and purchases they want, and put 20% in savings or toward paying off any debt.
Other child-related costs begin at a baby’s birth and include diapers, cribs, car seats, and high chairs. To save money, parents and young families can create baby gift registries and share those with friends and family, or explore the secondhand market. Millennial and older Gen Z parents should also factor in child care, which can be expensive.
Gen Z and millennial parents with their own budget strategies can also begin building long-term savings plans for their children. Parents can meet with financial advisers to better plan for the future. Parents can let their children experience the benefits of budgeting by putting money aside for them. For example, parents can open a savings account and have a 529 plan: a college savings or prepaid tuition plan. Savings plans such as these can offer income tax breaks for parents as well as financially provide for children down the road. When their children grow up, they can have funds for college, giving them a foundation for long-term financial success.
Personal Finance Podcasts
With the proliferation of podcasts, Gen Zers and millennials can learn about budget strategies and financial planning from various experts at the click of a button.
Teens, college students, young adults, and families can listen to finance podcasts to practice budgeting and enjoy the benefits of budgeting together. Podcasts address a range of finance-related topics, such as investing, personal finance, and entrepreneurship. Gen Zers and millennials at different stages in their financial journeys can learn aspects of investing, saving, budgeting, personal finance, and how entrepreneurship applies to their financial strategies:
The podcasts can ideally work as part of a comprehensive financial strategy designed by a qualified financial adviser. Gen Zers and millennials can also meet with financial advisers to establish financial strategies and their long-term monetary goals.
Learn Budgeting – Earn Your MS in Accounting
Understanding the importance of strong financial strategies can help Gen Zers and millennials to navigate the challenges they may face as they become fully immersed in their education, careers, and families. Students and professionals interested in helping people to plan for their financial futures should consider Maryville University’s online Master of Science in Accounting program. With a curriculum focused on evolving technology, increased regulations, and strategic financial management, the program enables students to gain the skills necessary to provide millennials and Gen Zers with effective, trustworthy financial advice. Explore how the program can help you to develop effective financial strategies and help others to enjoy the long-term benefits of budgeting and financial security.