Cash-strapped millennials should steer clear of expensive cities like New York or San Francisco, but where should they go instead?
To the Midwest, most likely. Five out of 10 of the top cities to be young and broke are in this region, according to a recent report from personal-finance site MagnifyMoney, which ranked 107 U.S. cities. (It may provide an alternative to all those people joining the current California exodus.)
The analysis is based on a city’s median rent, price of goods, average commute times, unemployment rate for young people, income tax, sales tax, percentage of young adults, and availability of cheap food (as expressed in the number of pizza parlors per 100,000 residents).
The No. 1 city on the list was Madison, Wis. where median rent is $950 per month and the average price of goods is 5% cheaper than the rest of the country. The city has a “robust public transportation system,” the study said, with an average work commute of 21 minutes.
“Madison has a strong public transit system, but just as importantly, has a robust bike system,” said Rob Gard, a spokesman for the Greater Madison Convention and Visitors Bureau. “There are nearly 200 miles of bike trails and bike roadways, which makes Madison one of the few U.S. cities with a platinum bike rating. And the bike system is used year-round.”
Also in the top five was Grand Rapids, Mich, which had a similar price of goods as Madison—5% less than the rest of the country and a median rent of $812 per month. It has a relatively low youth unemployment rate—for those aged 16 to 24—of 6.7% versus a national average of 8.5% in March, according to the Bureau of Labor Statistics.
The cities with cheapest median rent were Youngstown, Ohio at $651 per month and Toledo, Ohio at $692 per month (which ranked No. 79 and No. 23 overall respectively). The city with the shortest commute was Des Moines, Iowa, at 20 minutes. It ranked No. 7 on the list of top cities with median rent of $851 per month and prices of goods 4.4% lower than the national average.
Here are the top cities to live in for entry-level, college-educated workers:
1. Madison, Wis.
2. Grand Rapids, Mich.
3. Dayton, Ohio
4. Syracuse, N.Y.
5. Durham, N.C.
6. Des Moines, Iowa
7. Provo, Utah
8. Akron, Ohio
9. Chattanooga, Tenn.
10. Lexington, Ky.
The worst cities for the young and broke include expensive metropolitan hubs like New York City (98), Los Angeles, California (99), Houston, Texas (97), San Francisco (95) and Washington, D.C. (96). MagnifyMoney researchers say young people should consider moving if their cities are keeping them “broke,” even though jobs there may not pay as well as those on the East and West Coast.
Where a recent graduate moves after college, it can have a major effect on finances over the course of their lives, said Kali McFadden, senior research analyst at MagnifyMoney. “The earlier young people start saving for homes and saving for retirement, the better,” she said. “A lot of young people put that off for a good reason—they don’t have enough cash in their pockets to save.”
This is especially true for the current generation of young people, plagued by record student loan debt, stagnant wages for many entry level employees, and expensive living costs. “We encourage them to look at their whole living situation to make long-term financial decisions that will make a huge difference as they get older,” Kali said.