Whether it be for eating Avocado Toast, for being technology addicts, or seeming "entitled", it seems like the media is always bashing Millennials for something. On the topic of finances, there's not a whole lot of positivity flying around either. Compared to our parents' generation, the general consensus is that we aren't going to be as well off as them...
... however, despite some harsh realities to face up to, it may not be all bad news. It may even be possible to overcome the challenges ahead of us. Here are five recurring themes in the mainstream media surrounding Millennials and our finances.
1) Short Term Spending Habits
A popular opinion is that Millennials short term spending goals are of greater importance than our long term financial goals. This can be seen in Millennials that want to stay up to date on the latest fashion and technology trends, or for those of us that enjoy going travelling, and could be linked to spending money at the same rate as we earn at the expense of longer term goals (e.g. buying a house).
The result is that many of us have little to no long term financial plan, nor do we have an emergency fund for a rainy day if one comes about. A Fox Business article found 13% of Millennials have zero savings, with a further 60% having less than $5,000 of savings.
For many Millennials, the material dreams of buying a house, a new car, or retirement, may come later in our lives than it did for our parents, through failure to plan for the future and remaining focused on today's needs and wants.
2) Financial Assistance from Parents
A rather surprising finding in preparing this article. Estimates of the percentage of Millennials financially dependent upon our parents range from 46% to 63% according to USA today, the Motley Fool and Fox Business.
These sources suggest that parents help Millennials with a range of expenses, from basic daily needs such as phone bills, groceries, up to larger expenses such as rent and car insurance. The reasons behind the need for help are wide and far, and some can be further on in this post.
Let's begin by saying that nobody should be ashamed of being in this situation. Almost all of us have been there at some point, perhaps even today some of us still are. However, the majority of us will want to be able to be financially independent one day, without having to rely significantly on help from the Bank of Mum and Dad one day.
There are mixed arguments surrounding Millennials and our levels of debt. An NBC report found that 25% of Millennials are over $30,000 and 11% over $100,000 in debt. The report found that credit card debt is the most prevalent kind of debt, ahead of student loans and mortgages. On the contrary, Business Insider suggests that Millennials are doing a good job in keeping credit card debt low (36% with less than $5,000 and 32% with no Credit Card debt).
Whereas credit card debt may differ on a case by case basis, few would disagree that student debt is a significant challenge for many of us going through the education system and once we leave it. A greater number of Millennials are going to University compared to our parents generation, and the financial challenges of today are leaving us with up to 300% more student debt than our parents' generation. Those of us who studied in the UK or in the US know and took out student loans know that we will spend a good number of years of our working lives paying off tens of thousands of dollars/pounds of this debt.
Needless to say, whether accumulated through studies or spending, debt is another financial commitment than can limit our ability to spend, invest or save money.
4) Employment and Earnings
The financial crisis has had a profound impact upon employment prospects for Millennials, with many finding it difficult to find a job coming out of education in this challenging time. There are four factors that come into play here, playing up to varying degrees across Europe and the US:
The US and the UK have recovered rather well and both have relatively low unemployment rates today (estimated at around 3.9%* and 3.7%* respectively), but certain European countries such as Spain (14.0%*), and Italy (9.7%*) are still feeling the effects today. In competitive labour markets, high unemployment rates do not go in the favour of Millennials looking for work.
*statistics from Eurostat, 2019
- Earnings Growth
Earnings growth in the US has been rather stagnant for Millennials between 25 and 35 years old, with starting salaries estimated at 20% lower than our parents generation. The story in Europe is rather similar, with UK Millennial earnings falling 12% between 2007 and 2014. Even though prior generations have also been through economic downturns, the 2008 crisis lasted much longer than prior recessions, and the job situation did not recover in the same way.
- Purchasing Power
Simply put, how far does your money go. A CNBC report looking at Millennial Household income in the US found that despite household income growing, the purchasing power for that same income had not changed significantly over 40 years. That is to say, 40 years ago, more could be bought with $2,000 than can be bought with it today.
In summary, the economic conditions in which we have entered into the world of work and adult life have been less favourable than the conditions at the time when our parents' generation made this step in their lives.
5) Potential for success
Despite a difficult economic context and a different outlook on our finances compared to our parents generation, many of us do actually want to be able to build our own financial legacies and become financially stable.
Though there might not be a lot of money in them, many of us do have savings accounts. Those of us that do put money aside for retirement put up to 20% of our income aside. And if given $1,000, a lot of us would choose to save it or use it to pay off debt.
If we can embrace the attitude and habits necessary to create long term sustainable financial health, step by step we can defy the norms and negative stereotypes imposed upon us by the mainstream media and achieve our financial goals and objectives.
Can you identify with any of these observations on a personal level?
What challenges are you facing today in your finances as a young person?
What is the best way forward for Millennials and their finances in the world we live in today?
Leave us a comment with your thoughts!
Millennials With Money exists to provide personal financial education to Millennials and young people, and build a community of people who are motivated to creating long term financial health.
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"Don't believe the hype around Millennials and money, data suggests": https://www.theguardian.com/money/2019/may/11/dont-believe-the-hype-about-millennials-and-money-data-suggests
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"The grim reality of millennials who rely on their parents for money: ‘I pay for lunch at work, and I pay for my Netflix account'": https://www.marketwatch.com/story/why-its-time-to-cut-millennials-some-slack-for-being-financially-dependent-on-their-parents-2019-07-16
"Nearly half of millennials get money from their parents every month": https://eu.usatoday.com/story/money/2019/07/27/nearly-50-of-millennials-take-financial-help-from-their-parents/39802535/
"I’ve helped more than 400 millennials fix their finances—and these are their 6 biggest money mistakes": https://www.cnbc.com/2019/08/02/biggest-money-mistakes-millennials-make-according-to-a-financial-planner.html
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"If You're a Young Adult, Here's How You're Probably Spending Money" https://www.thebalance.com/young-adults-spending-your-money-4152967
"How Millennial Spending Habits Compare to Other Generations": https://www.thebalance.com/how-millennials-spending-habits-compare-to-other-generations-4240695
"What is the average Millennial Income?": https://www.thebalance.com/what-is-the-average-millennial-income-4171296
"Millennial households are earning more money than ever before—here’s why it may not be enough": https://www.cnbc.com/2019/01/11/millennials-households-earn-more-money-than-ever-heres-the-problem.html
"Making it Millennial": https://www.theatlantic.com/sponsored/deloitte-shifts/making-it-millennial/259/
"UK millennials suffer worst falls in earnings of any advanced economy apart from Greece, report reveals": https://www.independent.co.uk/news/business/news/uk-millennials-income-fall-worst-nationality-greece-earnings-report-resolution-foundation-a8217676.html
"‘Playing Catch-Up in the Game of Life.’ Millennials Approach Middle Age in Crisis": https://www.wsj.com/articles/playing-catch-up-in-the-game-of-life-millennials-approach-middle-age-in-crisis-11558290908