Savings rates for adults under 35 plunged from 5 percent in 2009 to a negative 2 percent, according to Moody’s Analytics, and the consequences are potentially huge. Here’s how a Wall Street Journal writer put it:
“A lack of savings increases the vulnerability of young workers in the postrecession economy, leaving many without a financial cushion for unexpected expenses, raising the difficulty of job transitions and leaving them further away from goals like eventual homeownership—let alone retirement….Those who don’t save are unlikely to be wealthy in the future, meaning American angst over wealth inequality seems poised to persist if most millennials are unable to save or choose not to.”
Unfortunately, the two “real people” quoted in the story both have college educations and decent jobs. The first has credit card debt (a synonym for “frivolous spending”) and would rather spend on “her social life and travel” while the second finds investments “too complicated.” These two reinforce the narrative that the only reason people don’t save is because they don’t want to.
In reality, most people under 35 don’t have a college degree. They have a higher unemployment rate than their elders and much smaller incomes–the median for households headed by someone under 35 was $35,300 in 2013, down from $37,600 in 2010. As the WSJ article notes, wages for those 35 and under have fallen 9 percent, in inflation-adjusted terms, since 1995.
(Millennials, by the way, also don’t have much credit card debt. In the 2010 survey, the latest for which age breakdowns are available, fewer than 40 percent of under-35 households carried credit card balances, and the median amount owed was $1,600.)
Saving on small incomes is, of course, possible–and essential if you ever hope to get ahead. But any discussion of savings among the young should acknowledge how much harder it is to do in an era of falling incomes. Today’s millennials have it tougher than Generation X did at their age, and way, way tougher than the Baby Boomers. It may comfort older, wealthier Americans to imagine the younger generation is just more frivolous. But that does a disservice to millennials, and to our understanding of the real causes of wealth inequality.
Today’s top story: A surprising way identity theft can hurt your credit.
Also in the news: Tips on how to manage major bills, rethinking retirement for Millennials, and financial tips for veterans from military experts.
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Don’t pay all at once.
3 Ways to Rethink Retirement for Millennials
A different look at the bigger picture.
Dear Liz: My mother, who is widowed, has credit card debt. When she dies, are my sister and I responsible for that debt? There is no estate, but she does have a small amount of life insurance that mainly would go toward her funeral expenses and fixing things in her home to get it ready for sale.
Answer: If your mother owns property, then she has an estate. If she has any equity in the property when she dies, some of that equity might have to be used to pay her debts.
You and your sister, however, are not responsible for your mother’s debts. The life insurance also does not have to be used to pay debts if your mother names a beneficiary (or beneficiaries) for the policy and at least one of the people named outlives her. In that case, the insurance proceeds would go directly to the beneficiaries, bypassing the probate process.
If she doesn’t name a beneficiary, the insurance proceeds may be included in her estate and used to pay her final bills, including credit card debt.
If your mother can’t pay what she owes, she should consider talking with a bankruptcy attorney about her options.
Dear Liz: Regarding your recent answer regarding a mysterious debit charge, I beg to differ with your quoted source, Odysseas Papadimitriou of Evolution Finance, who said it was unlikely to be fraud. It took me all of 30 seconds to search online for “credit card fraud small amount” and found multiple reliable sites dedicated to just the kind of small-amount fraud your reader was asking about. I’m amazed that anyone claiming the slightest amount of expertise in credit card scams wouldn’t be aware of this. Ironically, nothing would help the scammers more than purported experts advising the public at large to ignore this type of fraud and assume instead it’s the result of their own oversight. Why such clearly wrong-headed advice is appearing in your column is beyond me.
Answer: Small-amount fraud is a problem — for credit cards. The original question and Papadimitriou’s answer related to a debit card transaction. While small-amount fraud is certainly possible with debit cards, Papadimitriou said the far more common pattern was for thieves to attempt to steal as much as possible before the card was shut down. That, and other details of the transaction, led him to conclude the credit union was probably correct that the transaction wasn’t fraudulent.
Dear Liz: In reading the story of the person with the errant charges on a debit card, I had a similar issue. I found a charge in a town where I had not traveled, at a business I was unfamiliar with. My bank wanted me to contact the business and explain my issue. I said NO! It turns out someone had “keyed” in my debit card number for a $19 charge in error. My response to my bank was that they made the error on giving away my money and that if they wanted to continue being my bank, they would resolve this issue and replace my money. It took about two weeks, but the merchant complied with the bank’s request and gave back the money.
Answer: In the original question, the transaction occurred in the questioner’s home town and the credit union said a PIN was used. It’s highly unlikely that both a debit card number and its PIN would be randomly entered in error.
But your experience highlights the problems inherent in using a debit card. Fraudulent transactions come directly out of your checking account, and you sometimes have to fight with your financial institution to get the money back.
With credit cards, you don’t have to pay the questionable charges until the credit card company investigates.
It’s vitally important to review all transactions on both debit and credit card accounts, and to question any unfamiliar charges. In this case, the merchant wasn’t clearly identified and the customer certainly has the right to push the credit union for more detail. But when all indicators point to forgetfulness rather than fraud, the reader may have to accept that the charge was legitimate after all.
Today’s top story: How to calculate your retirement number. Also in the news: Hilton HHonors program suffers a data breach, the biggest mistakes people make when saving for retirement, and a beginner’s guide to taxes for newly married couples.
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Realistic goals are key.
A Beginner’s Guide to Taxes When You’re Married
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5 Habits of Highly Effective Credit Card Users
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Today’s top story: How student loan servicers are trying to trick you. Also in the news: When to use your debit card instead of credit, saving for your kids’ college education, and tips on getting and staying out of debt.
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Pay close attention to every correspondence.
7 Times to Use a Debit Card Instead of a Credit Card
Don’t pay the interest unless absolutely necessary.
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Planning for one of life’s biggest expenses.
10 Ways to Get Out — and Stay Out — of Debt
Does Bad Credit Last Forever?
Waiting it out.
I’ll be joining award-winning artist Sylvia Saint James and my friend Lois Frankel (author of several books, including “Nice Girls Don’t Get the Corner Office”) on Sunday, Dec. 7 for the films and the reception at the Autry Center in Los Angeles’ Griffith Park. Tickets are $75 for adults and $25 for children, and include admission to the museum (which currently has a special exhibition on Route 66).
For more information, please visit Bloom Again’s site.
Today’s top story: How often you need to change your passwords. Also in the news: The truth about life insurance, annuities, and financial aid, how to catch up on your retirement savings after 50, and the four necessities for a successful retirement.
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Getting yourself financially healthy.
Today’s top story: The best additions to your financial toolbox. Also in the news: Safeguarding your digital assets, saving money on moving expenses, and what you should look for when choosing a new bank.
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Additions to your financial toolbox.
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Ten minutes you can’t afford not to spare.
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The most important things to look for.
Today’s top story: How to save money on your upcoming tax bill. Also in the news: Tracking your wasteful spending, how to get the best deal on car insurance, and why it pays to shop around for Medicare insurance plans.
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How to Track Your Most Ridiculously Wasteful Spending
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The older you get, the less you’ll pay.
It pays to shop for Medicare insurance plans
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Parents of special needs kids can bank on trusts
Providing for your child’s needs after you’re gone.