Yahoo Finance Must-Do Money Tips for Millennials in the Military
Millennials in the military tend to be more advanced financially than their non-military peers, according to a survey released last week by Navy Federal Credit Union. They're more likely to have established long-term money goals and feel more prepared to achieve them.
The survey, which sampled 300 millennials in the military and 1,011 in the general population, found that active-duty adults were more likely to have started planning their financial futures compared to their civilian counterparts (66 percent versus 49 percent ). They also self-reported higher levels of the financial knowledge they felt they needed to meet those goals (58 percent vs. 37 percent ). Military millennials were also likelier to say they're on track to meet their five-year money goals (89 percent vs. 78 percent), twice as likely to review a household budget and twice as likely to check their credit score once a year.
"When you're in the military and you join between ages 18 and 21, you get put on a track where you don't have a choice but to mature in many different ways, and one of them is financially," says Randy Hopper, vice president of credit cards and business optimization for Navy Federal Credit Union.
The survey also showed that millennials -- both military and civilian, and defined for this study as being between 18 and 34 years old -- appear to be making a strong recovery from the Great Recession. More than 80 percent of both groups said they expected to be satisfied with their finances in five years.
At the recent webinar to unveil this data, Maritza DiSciullo, Navy Federal Credit Union's vice president of member research, intelligence and development, told reporters that: "This is a sign that millennials are becoming much more financially confident and prepared. We think it represents a turning point in our economy -- a cultural sense of optimism."
While the Great Recession and its attendant high unemployment rates, especially among millennials, seem to have caused many millennials to delay big life events such as marriage and children, Hopper points out that military millennials still tend to reach those milestones more quickly. "They hit the accelerated path," he says, including in the credit card space. They're more likely to take out credit cards so they can establish their credit history and eventually purchase a home, he says.
"We will continue to encourage millennials to use credit cards as a first step... It's a great way to get introduced to credit in a safe way. We will continue to advocate for members to responsibly understand what they are getting themselves into," he says.
Of course, having a credit card also comes with risk, and avoiding building up expensive debt is another important financial lesson. To walk that line, Hopper offers these credit card tips to military millennials -- most of which apply to civilians, too:
1. Make use of card-related tools.
Credit cards often come with an online interface that makes it easy to track spending and even set up alerts when you start to approach your budget in certain categories. "You can set alerts so you can see when it's time to cut back and that gets people into a good habit of budgeting on a regular basis," Hopper says.
2. Limit your balance.
Hopper recommends keeping credit card balances at 30 percent or lower than the credit limit on the card. That way, users can be sure to keep their spending manageable and avoid building up crushing debt. At Navy Federal Credit Union, 1 in 4 new credit accounts are opened by members who don't have previous experience with credit, and the average credit limit on those accounts is $2,500. "It ensures they're never going to be too far extended," he adds.
3. Build up your credit history.
Hopper points out that not everybody needs to buy a car or a house in their 20s, which makes credit cards a great way to build up credit history without using them to pay for those big-ticket purchases. That way, when you are ready to apply for a bigger loan, lenders can see that you have experience paying your bills each month. "It's a useful introduction to credit and a way to become familiar with how credit works," he says.
4. Learn as much as possible.
Navy Federal Credit Union offers a financial literacy package along with new credit accounts, and many other financial institutions also make educational materials available on their websites and elsewhere. (Anyone can also visit navyfederal.org and browse articles under the "advice and planning" tab.) "It includes how to establish their credit history, tips for making payments on time and the benefits of paying in full," Hopper says, among other lessons.
5. Protect your accounts.
With millennials especially eager to use mobile apps and online banking tools, Hopper suggests making sure passwords are robust and changed regularly, and that online shoppers avoid stores they aren't familiar with. He also suggests reviewing accounts regularly so any unauthorized charged are flagged quickly.
6. Start small.
Whether you're paying off debt or are trying to grow your savings account, Hopper suggests starting small to avoid getting overwhelmed. "It doesn't have to be this big event, like putting $1,000 into a savings account. Being able to have a disciplined plan and strategy for budgeting can start by setting aside just $20 a paycheck," he says. "Soon, you'll have a rainy day fund."
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