How Millennials Treat Credit and Debt, According to Facebook — and Why They Should Change Their Approach


Facebook’s Findings 

American millennials are taking a much different approach to debt and credit than previous generations, eschewing debt and credit cards in favor of savings and cash purchases. That’s according to a recent report compiled by Facebook IQ, a branch of the social media giant that mines data for insights into the lives of their users. In fact, their research, based on a combination of user data, Facebook conversations, and survey results, suggests that millennials (ages 21-34) define financial success and fiscal responsibility much differently than older Americans.

There could be a number of explanations for the more cautious approach to debt and credit cards. The 2008 recession, a feeling of disconnect with large financial institutions, or the desire to live free of financial obligations could all motivate today’s young person to avoid taking on debt or opening credit cards.

No matter the reasons, Facebook’s report paints a clear portrait of millennial attitudes toward personal finance.

How Millennials Approach Finance

  • They Value Saving: An overwhelming majority of the millennials studied (86%) value saving. Most are not saving for a specific goal, but because it’s the responsible thing to do. Other goals include saving for an emergency or a home.
  • They Avoid Credit Cards: Millennials are much more likely than previous generations to avoid credit card purchases, with more than half paying primarily with cash. Most millennial conversations on Facebook about credit cards express a desire to pay that debt off – rather than use credit cards strategically to build credit.
  • They Avoid Debt: Debt is a major point of concern for millennials — with almost half defining financial success as being completely free of debt. Other definitions of financial success – including homeownership and the ability to retire — are far behind in popularity.
  • They Have No Financial Plan: What’s surprising, considering their restraint when it comes to savings and avoiding debt, is that millennials are far less likely than older generations to invest or even have a financial plan for the future.

Using Credit as a Tool

While their motivations may be pure, the avoidance of debt and credit actually makes millennials less powerful as consumers.

Reliable credit history opens up future opportunities. Once millennials are ready to take on debt — for a home or a car, for example — a lack of credit history is going to make it difficult for them to obtain the finances they need. In this way, debt can actually work in someone’s favor. A car loan that is paid regularly and on time will boost a young person’s credit score substantially compared to someone with no debt on the books at all.

Credit cards are also a valuable way to help build good credit. Rather than rack up an unmanageable balance, millennials can use credit cards only for purchases they can afford, then pay off the balance each month before the interest kicks in – essentially, treating a credit card like cash. This way, they can avoid credit card debt but still build their credit.

Millennials can use debt and credit to their advantage by practicing the following good credit habits:

  • Making payments in full and on time
  • Utilizing no more than 30% of their available credit at any time
  • Monitoring their credit report and credit score
  • Paying off their credit card balances in full each month

They Want to Learn

 According to the report, millennials are willing to improve their understanding and behavior when it comes to finance. The financial services industry – and knowledgeable experts – should be willing to share their knowledge and expertise with young people. Once the value of good credit and debt is learned, millennials can start using these tools to their advantage, empowering themselves to create a smarter and more responsible financial reality.



Related Articles:

20 Easy Ways Millennials Can Boost Their Credit

5 Ways Millennials Need to Use Credit to Their Advantage

10 Things about Credit Reports Parents Should Explain to Their Teens

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