The Great Depression was experienced by the so-called “Silent Generation,” individuals born between 1925 and World War II. Those born during the global conflict were dubbed “War Babies.” They were followed by the “Baby Boomers,” who not only increased the population significantly between 1946 and 1964 but were also among the first to enjoy the benefits of the welfare state, which included relatively affordable healthcare, free higher education, a plentiful supply of jobs, and reasonably priced housing. Later, during Generation X, approximately those born between 1965 and 1979, those members started accruing significant amounts of personal debt and saw the introduction of personal computers.
Enter the millennial generation, born between 1980 and 1995 and were the first to enter the new century. They were well-known for being particularly “tech-savvy,” mainly engaged in following their interests, and whose consumer and business habits are credited with the demise of many sectors. According to Pew Research Center statistics, one in every three American employees today is a millennial, making the generation the biggest in the U.S. labor force. Despite their vast numbers, they confront a variety of financial challenges unique to their age. Let’s discuss the financial scourge the millennials are facing with.
The Myriad of Financial Woes
The timing was a significant problem. Growing up and entering the workforce amid a historic economic downturn between December 2007 and June 2009, Millennials have seen the effects of the Great Recession first-hand. Many occupations were either abolished or drastically reduced, such that many millennials are still feeling the effects of that era.
Students with record-high student debt, unforeseen expenditures, and the need to save more for life milestones such as retirement are important money issues that millennials are still dealing with today.
According to a study by Student Loan Hero, while millennials’ earnings have increased by 67 percent since 1970, their living expenses haven’t kept up. College student loan debt has increased by more than double since the 1980s, with the average student loan debt per graduate in November 2018 standing at $17,126. Between 2000 and 2013, the number of students taking out student loans rose by 10%.
On top of rising college tuition costs, Student Loan Hero reports that millennials buying their first house are paying almost 40% more than baby boomers who purchased their first home in the 1980s.
If you’re one of the lucky ones, you’ve been able to purchase your own house. It’s a record low for homeownership. It may take almost a decade to save enough for a 20 percent down payment in certain parts of the nation, according to a SmartAsset study on the subject. Undoubtedly, the issue is much more significant in California, where housing prices have skyrocketed far beyond the national average.
Whoever does not own a house or cannot buy a home must spend their hard-earned money on rent. According to Student Loan Hero, rents rose by an average of 46 percent from 1960 to 2000 when adjusted for inflation. According to the 1960 census, the median gross monthly rent was $71, equivalent to $588 now. That figure had increased to $602 in 2000, equal to $866 in today’s currency. There’s little doubt that the housing scarcity developed in recent years, particularly in California, has made these statistics irrelevant, especially since the state passed legislation limiting rent increases.
In terms of wealth creation, millennials born in the 1980s are in danger of becoming a “lost generation,” according to a Federal Reserve Bank of St. Louis study, and in the worse case, could join an influential group that would need a bankruptcy attorney. An analysis from 2016 showed that wealth among millennials fell by 34% during the financial crisis of 2007-09, making this generation the slowest to recover from it. According to the businessinsider.com report from August 2018, “they’ve been trying to catch up ever since.”.
Millennials are becoming more responsible for caring for their elderly parents, and this trend is expected to continue. When it comes to caring, millennials spend 27 percent more than previous generations, according to Clare Ansberry in the Wall Street Journal. To make matters worse, one-third (33 percent) of these carers earn less than $30,000 a year as a whole. An economic downturn marked by high unemployment means that the path to recovery for the generation now living in poverty will be a long and winding one.
“COVID-19’s effect has been catastrophic for millennials who were already struggling to maintain a feeling of financial stability in the aftermath of the Great Recession,” said Stephanie Bell-Rose, Head of the TIAA Institute. This report’s findings will help us better understand millennials’ financial resilience and provide a path for how they may recover and maintain financial security beyond retirement.
