By Nia Saunders
The millennial generation are the demographic of the population who reached adolescence around the turn of the 21st century. They have been molded by not only the generation before them, but by many societal and cultural changes. As the newest generation to approach the investment scene, the millennial’s financial habits can help us understand the future of the economy.
Millennials are considered the “Me Generation” and are often labeled as materialistic, entitled and lazy. However, millennials are actually extremely frugal, and have spending habits parallel to the Silent Generation, who were alive during and after the Great Depression. This may come as a surprise to some, but as witness to the economic downturn of the Great Recession of 2008, millennials have more than enough reason to adopt this careful mindset. Young adults during the Great Recession were among the highest demographic of the population to lose their jobs. Children and teenagers who were not yet in the workforce were affected when they saw their parents being laid off or their house being foreclosed. The reality check from the Great Recession turned the millennials into a generation of conservative spenders.
In addition to the affects of economic downturns, student debt has more than doubled in the United States in the past decade. An increase in entry level jobs in the workforce that require bachelor’s degrees has added pressure to the requirement of a college education. A large amount of debt has had the greatest impact on the millennials’ spending habits. Both have undoubtedly contributed to the downward trend of large purchases and ownership. According to the Federal Reserve, homeowners between the ages of 24 and 32 have dropped 9% between 2005 and 2014. Statistics from Goldman Sachs revealed that 30% of the millennial generation have no intention of purchasing a car anytime soon. Instead of making large purchases on houses and cars, millennials have shifted to renting their homes or relying on public transportation and carpools.
Economic factors are not the only reason for the shift in the millennials’ spending habits. One of the most considerable differences in social stances between millennials and generations before them is the age they choose to start a family. The average age of marriage has increased six years for women and men to that of the Baby Boomer generation, and the age continues to rise. A major contribution to millennials waiting to get married and have kids is the economic effects of student debt. Most millennials feel they can’t afford to have children. Modern medicine and the rise of life expectancy also allows millennials to feel the need to take their time when it comes to settling down.
What happens to the future of the economy relies on the choices of the millennials. If spending and making large investments continues to decline, we could see a major disruption. As the economy continues to strengthen and recover from the Great Recession, we could see a rise in millennials as home and car owners. Solutions to decrease student loan debt would greatly help the confidence in millennials to start spending as well, thereby contributing to the stability of the economy. Compared to generations before them, millennials require a longer transitional period to reach financial adulthood. It looks as if the US economy would like to see growth, it just has to wait alongside with them.
Caption: Student loan debt is one of the biggest hurdles for aspiring homeowners.
Source for infographic: https://www.previewochomes.com/blog/student-loan-debt-homeownership-infographic.html
Other Sources:
https://www.bls.gov/opub/mlr/2014/beyond-bls/millennials-after-the-great-recession.htm
https://www.nasdaq.com/article/how-millennials-are-changing-the-global-economy-cm593840
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