1/4 of Millennials’ Parents Pay Their Rent — How To Put Money Saved to Best Use
When it comes to matters of the economy, millennials haven’t had it easy. They entered the workforce during the Great Recession, have been targeted by hustle and burnout culture and are saddled with student loan debt. Now, millennials are the generation most at risk for being laid off. Fortunately for many, mom and dad have come to the rescue. According to a new survey by Chartway Credit Union, 24% of millennials admit that their parents still pay their rent.
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The general rule of thumb is that 30% of one’s income should go to rent, but Americans are often cornered into spending more. For instance, in New York, the rent-to-income ratio in 2022 was 68.5 percent, according to Moody’s Analytics (per The NY Times); while in Miami, Florida it was at 41.6% and in Los Angeles it was 35.6%.
The ability to save 30% or more of one’s paycheck is substantial. So what should millennials whose parents’ are footing their bill be doing with their savings on rent?
1. Pay Off Credit Card Debt
“Too many people find themselves buried in high-interest credit card debt and it’s a tough hole to get out of,” said Mark Wlosinski, a personal finance expert. “Once you’re stuck in credit card debt, the interest payments on that debt ends up being another expensive monthly bill added to what’s already an extremely thin budget. Paying that off as soon as possible guarantees a positive ROI (return on investment) and is one of the best things to do, in my opinion.”
2. Buy a Rental Property
“Consider investing in real estate by purchasing a rental property,” said Andrew Lokenauth, founder of Fluent in Finance. “This can provide passive income and potentially appreciate in value over time. As a first time buyer, you can put as little as 3.5% down, or 0% down if you served in the military.”
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3. Invest in Your Retirement
“Consider maxing out a 401(k) or IRA to ensure a comfortable retirement,” Lokenauth said.
4. Build Up Emergency Fund
“Life is full of unexpected events, and some of them will unfortunately cost you money,” Wlosinski said. “Emergency funds are essential to have for this reason. A recent poll found that 56% of people wouldn’t have enough money on hand to cover an unexpected $1,000 expense. Those who can’t cover it usually will turn to credit cards or loans with high interest to pay the bill which only makes their financial situation worse.”
5. Pay More Toward Student Loans
“Even if your interest rate on student loans is lower than the 4-5% range, extra money saved every month by not having a rent can still be put to work here,” Wlosinski said. “Being in any kind of debt still means an extra bill due every month, and eliminating that bill sooner means more free cash flow for your future.”
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6. Take a Financial Planning Course
“Invest in your financial education and take a course or hire a financial advisor to help you make informed decisions with your money,” said Lokenauth.
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