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Nitesh Patel
Finance | Financial advice

By Nitesh Patel

When it comes to planning for long-term financial security, how many among us wish we would have done things a little differently way back when? We should have done this or we could have done that. There’s a whole new generation of young adults – Millennials in their early to mid-20s – who could learn from our missteps. And the members of the Millennium Generation readily admit they’re struggling with their money management and financial security.

According to a 2004 Northwestern Mutual-commissioned study by Harris Interactive1, more than half of adults in their early to mid-20s confess they have little knowledge about money management and investing, while only 5 percent feels very knowledgeable. Millennial women are even less knowledgeable than men about handling their finances; while 50 percent of men say they are “very” or “somewhat” knowledgeable, only 30 percent of women feel the same way.

Based on this lack of knowledge, it’s no surprise that Millennials have been relatively unsuccessful at avoiding large debt. The Millennium Generation Study found that 20 percent of 2001 college grads have amassed more than a $5,000 on their credit cards.

Debt by plastic is a growing problem among the Millennium Generation: According to another survey by Myvesta, a non-profit consumer education organization, those aged 18-24 carried an average balance of $1,208 on their credit cards in 2003, up from $849 in 2002. Interestingly, Millennials are now accruing more credit card debt while Americans on the whole are reducing theirs’ – in 2003, the average American had credit card balances of $2,294, down from $3,250 in 20022.

Beyond credit cards, the Millennium Generation Study found that 45 percent have accumulated more than $10,000 in student loans – the same amount that more than 40 percent of 2001 post-grads were still trying to pay down in 2004. These numbers appear likely to rise, based on rising college cost trends. Nellie Mae, the student loan company, says in 2003, the average undergraduate debt was $18,900, up 66 percent from $11,400 in 19973.

Despite their lack of knowledge, the Millennium Generation believes home ownership will be their most important asset for financial security, closely followed by 401(k)s and IRAs. Unfortunately, the Millennium Generation Study found that only one-fifth of the group says they are knowledgeable about owning a home.

Furthermore, they see tools such as life insurance, employer-paid pensions and profit sharing as even less important. In fact, Millennials are divided on the importance of profit sharing – only about half say its important and the other half say it is not.

No Time Like the Present

Clearly, this is a group that is headed for a time of “shoulda woulda coulda” when it comes to their financial security. But, it doesn’t have to be that way. While planning and financial security are not exactly top-of-mind for those in their 20s, it is highly advantageous to get educated and take action now, especially as they establish their careers, save and invest their salaries, and anticipate their key earning years. Here are some proactive financial strategies for 20-somethings:

Establish good credit. To avoid future credit card debt, monitor and minimize credit card purchases, and make sure the monthly amount can be paid in full or at least paid at a lower-interest finance charge. Create an emergency fund. In case of unemployment, create an emergency fund to help cover at least six months of wages. The easiest way to do this is to automatically deduct the money from each paycheck.

Start a 401(k). While evaluating a job, know the value of retirement benefits, such as a 401(k), and enroll as soon as possible. Raise time is a smart time to increase contributions into the plan – most won’t miss the extra money.

Learn about investing. To get started, use resources such as Internet sites, books, continuing education courses and talking with financial professionals. One source,, has a section called “Money 101: An Interactive Course on Managing All Your Finances,” which has information on the “Basics of Investing,” and related topics4.

Cover basic insurance needs. Young adults should arm themselves with good insurance coverage – health, auto, renters and disability income insurance at minimum. Some plans are available through an employer (health, disability, life, etc.), but everyone should make sure they have adequate coverage for their particular situation. Talking with a financial expert can help determine this.

When it comes to financial security, it’s never too early to start planning – even as young adults enter their first jobs. The more they know and plan now, the more benefits they’ll receive later.

The Millennium Generation Studies, Harris Interactive for Northwestern Mutual, online study conducted March 23 through April 5, 2004

2 Myvesta,, “College Students Earning Degrees in Debt,” December 11, 2003

3 Nellie Mae,, “College on Credit: How Borrowers Perceive their Education Debt,” February 6, 2003

4 “Money 101: An Interactive Course on Managing All Your Finances,” August 4, 2004

Nitesh Patel is a financial representative with the Northwestern Mutual Financial Network based in Clearwater for The Northwestern Mutual Life Insurance Company, Milwaukee, Wisconsin). To reach Patel, call (727) 799-3007 or e-mail

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