We live in times where the world is inundated with endless income sources, yet many are broke. There is a massive influx of startups, new innovations, and lifestyle changes are propagating jobs that were never seen before, the advent of technology and social media has made art wildly recognizable. As a result, people are broadly drawing earnings from all the channels offered by the 21st century. And yet, there is not enough money for everyone.
Researches and surveys have proved that Millennials tend to be much more reckless with their money when compared to past generations. This is the generation that is highly dependable on debt and enjoys a “threat themselves”* attitude and consequently has less financial stability- despite them earning more than previous generations.
According to a report by the United States Federal Reserve in 2018, Millennials are less well off than people from earlier generations when they were young. The current generation has fewer assets, and less wealth.*
The research and similar others have led to the conclusion that Millennials are poor and they are “the most broke generation” ever.
A research report prepared by Pew Research Center in 2018 is what makes it more striking. It found that the household earning of Millennials are more than past generations at the same age in the past 50 years.*
This ironically makes Millennials the most broke yet the richest generation in the last five decades and more.
Money, money everywhere, not enough to splurge.
According to data from the U.S. Federal Reserve, Millennials controlled just 4.6% of the wealth in the U.S. during the first half of 2020 even though they make up the largest population of the workforce.* The report also states that 53% of the country’s wealth is controlled by baby boomers while just over 25% is accounted for by Gen X. The rest 17% is owned by the silent generation.
While it is not unusual for older generations to be wealthier compared to previous generations due to more time in hand to earn and accumulate wealth and assets, the Fed’s data also reveals that Millennials have considerably less wealth than boomers had at the same age.
Fed report noted that in 1989, baby boomers were about the same average age as the Millennials are now but controlled 21% of the wealth of the U.S.– which is five times more than what the Millennials control today.
Other studies conducted previously have concluded Millenials to be, on average, worse off financially compared to their previous generation of parents and grandparents at the same age. This is despite better education and earnings compared to the same age for the past generation.
However, there are also arguments that many Millennials have found it increasingly difficult to pay off student loans, especially those who are struggling with unemployment and low-paying jobs. Further, the global financial meltdown of 2007-2008 had left about 15% of the Millennials– then in their early 20s, out of work with many of them still unable to find a steady foot on the ground.* The recession has arguably hit Millennials the most.
A few recent studies have shown that many Millennials who were hit hard during the recessions are still lagging behind their financial schedule more than a decade later.
A 2019 Pew Study Global Attitudes Survey showed that many of the Millennials with children believe that the next generation will be better off financially than they are. For example, the study showed that this belief was persistent among 29% Australians, 13% Japanese, 16% French, 22% British, 30% Canadian, 31% American, and 48% German Millennial parents.*
Young, dumb and broke- What’s making Millenials financially weak?
According to a survey report by the American Institute of Certified Public Accountants (AICPA), more than three-fourth of Millennials desire to follow their peers. They want to own the same clothes, cars, and gadgets as their peers and friends. Further, the study also found that more than half of the Millennials were forced to use their credit cards to pay for basic daily necessities such as food and utilities. At the same time, more than a quarter of the Millennials also make late payments or are currently dealing with bill collectors. Interestingly, more than half of them still receive financial help from parents in one form or the other.
One of the major factors that make Millennials feel the pressure of conforming to the financial habits of their peers is social media. Regular posting of milestones and achievements such as buying a new house or car is being dubbed as benchmarks that the generation is subconsciously following.
To make matters worse are the economic transitions taking place every day at a supersonic speed. Stagnant wages, increasing student loan debt, inflation, higher medical and housing costs, and more have dropped a boulder in the path of wealth creation, subsequently leading to more liabilities than assets.
According to the Pew Research study, households with Millenials as breadwinners with a bachelor’s degree or higher earns a median adjusted household income of about $105,300. On the other hand, those who are high school graduates earned about $49,363 annually.
In comparison, baby boomers, without degrees, at the same age earned $51,287 to $54,026 in 2017 dollars on average while those with degrees earned between $80,552 and $95,182 in 2017 dollars on average.*
Therefore, even while considering that the Millennials have significantly benefitted from a 67% growth in wages since 1970, research by Student Loan Hero found that an increase in wages was not enough to keep up with amplifying living costs.* Millennials have faced tough times with increasing expenditure for childcare, healthcare, and entertainment along with increased rent, home prices, and college tuition expenses, all of which have increased faster than their incomes.
In fact, many also blame student debt, which is claimed to be at an all-time high, as one of the major factors pushing Millenials back on the path of becoming financially well off. It should be mentioned that college tuition has more than doubled since the 1980s. Further, it is argued that Millennials also spend more of their income compared to previous generations for caring for older family members.
Every generation faces its own set of challenges. While it may appear that the silent generation’s costs were lower than today’s, many people from that generation were born during the Great Depression and experienced World War II, and things were certainly not easy with the responsibility of helping rebuild the United States.
And for Millennials, it is fair to say that the Great Recession has given a harsh awakening when the high expense of their education did not translate into greater incomes. Underemployment and rising living expenses, along with school debt payments, have made it difficult for Millennials to advance.
Millennials began adulthood with less leeway for financial missteps than prior generations due to a challenging set of financial conditions. As a result, people are handling their money in a new way. More Millennials are refinancing college debts, postponing house purchases, and searching for novel ways to supplement their income through side hustles.
Millennials are not falling behind financially as a result of their own shortcomings. Far from it, their creativity and adaptability have enabled them to adjust in the face of high expectations and high expenses.