Young Americans are trying to “unlearn” the financial habits they picked up from their parents

Young Americans are trying to “unlearn” the financial habits they picked up from their parents

Most of us adopt habits from older generations, either because of what we were taught or because of observations that lead us to believe that certain behaviors are “normal.”

This can be especially true when it comes to managing money, as there is often little formal education on the topic of personal finance.

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“We get our financial personality from childhood,” financial planner Angela Dorsey of Dorsey Wealth Management told Jessica Chou of The Wall Street Journal. “So if there was a lot of hesitation about that growing up, that shapes how you feel about money and taking calculated risks.”

Chou spoke to a friend who struggles with spending to improve her quality of life after years of watching her parents scrim and save. Chou herself had to “unlearn” lessons from her risk-averse mother and start putting money into something beyond a basic savings account.

Unfortunately, not all of the financial behaviors we learn from our parents will set us up for long-term success. With that in mind, here are three financial attitudes that many young Americans should try to unlearn.

Relying on credit cards to finance your lifestyle

Credit card balances in the U.S. have surpassed $1 trillion, according to the New York Fed, and delinquencies have surpassed pre-pandemic levels. Experian data shows that the average consumer was carrying $6,501 in credit card debt in the third quarter of 2023, a 10% increase from the previous year. Arguably making things worse for consumers these days is the emergence of BNPL Loans (Buy Now Pay Later).

With the average credit card interest rate at almost 28%, Forbes AdvisorIt is important that younger generations avoid repeating the spending mistakes of older generations. Drowning in expensive debt can prevent them from achieving their financial goals and enjoying a good night’s sleep.

Read more: “It’s not taxed at all”: Warren Buffett shares ‘best investment’ you can make when fighting rising costs — take advantage today

Treat home ownership as essential

Homeownership has long been the financial holy grail for baby boomers, with many treating purchasing a property as the key to building wealth. In fact, 45 percent of baby boomers became homeowners between the ages of 25 and 34, compared to 37 percent of millennials who did the same, according to Berkeley Economic Review.

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According to real estate economist Ken H. Johnson, millennials may have avoided buying homes despite seeing housing prices fall during the Great Recession because they realized that homeownership wasn’t necessarily the best investment. He says they likely determined that they could end up wealthier by renting and investing more of their money in stocks and bonds.

“I just think younger people are realizing, ‘Hey, maybe I need to rent and reinvest. Maybe I need to be able to pick up and move to Atlanta or Washington, D.C., in relatively short order to get the highest salary and the best career advancement,’” he said. Realtor.com recently. “And when you put it all together, I’m not surprised that the average age for first-time homebuyers is increasing.”

Renting certainly has its advantages today, with mortgage rates rising to their highest levels in decades. Financial experts like Peter Schiff and Ramit Sethi recently said that renting is the best option for many Americans.

While buying may still be a path to wealth, the younger generation has definitely reconsidered the idea that homeownership is the key to achieving the American dream.

Not prioritizing investment

For many boomers, investing wasn’t something they did early on. According to data from Charles SchwabThe average age at which baby boomers started investing was 35. With the starting ages for millennials and Gen Z being 25 and 19, respectively, it appears that younger Americans are not following in their parents’ footsteps.

“When comparing themselves to their parents at the same age, more than half of Americans surveyed believe they are doing a better job investing (51%) and also feel they are living their desired lifestyle more than their parents did at the same age (52%),” the press release said.

Members of these generations are more likely than their older peers to say they learned about investing at a young age and were taught about investing in school. This can yield higher retirement balances over time.

By changing their perspectives on investing, home ownership and credit card debt, members of younger generations may very well end up doing better financially than their baby boomer parents — despite the pessimism we so often hear about their financial prospects.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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