Are Millennials Failing Financially?

The Average Millennial's Financial Situation

Let's face it, most of the discussion around personal finance and net worth involves the Baby Boomer generation. Perhaps this is due to their overall proximity to the traditional retirement age of 60-65 years old.

Generally speaking, the Boomer's have a sad financial state of affairs given their age (more on that later). This lack of financial net worth is significant because of how many Boomers there are in this country. According to a 2019 survey, there are just over 69 million Boomers in the United States. However, most are unaware that there are actually more Millennials in the US to the tune of 72 million.

The fact that Millennials actually outnumber the Baby Boomers is lost on most people. Most of the news and media reports are focused on the Boomers proximity to receiving Medicare and requiring long-term care. It seems unwise to focus so intently on one group, especially if they are not the largest percentage of our overall population. That said, we need to put the present state of financial affairs of the average Millennial into focus.

Millennials vs. Boomers

Most Millennials (generally considered those born between 1981-1996) entered the workforce around The Great Recession between 2007-2009. That said, with rising costs of education and living in general combined with decreased earnings, the unfortunate average financial net worth of a Millennial is below $8,000 per household according to a 2019 study by the Deloitte accounting firm.

​Typically parents want their children to do better than they did. Consider how low that bar might actually be set given that the average Baby Boomer household retirement savings is $144,000, per a recent Transamerica survey. Boomer's are widely considered those born between 1946-1964. That leaves some Boomers older than 75 years old with the youngest Millennials in their early 20's (as of 2020). Some Millennials may be up to 50 years young than some of the oldest Baby Boomers. 

According to recent U.S. Census data, 60% of married Millennials and 80% of unmarried Millennials earn less than $40,000 per year. The folks over at SmartAsset report that the average salary of a Millennial today is an estimated ​20% lower, in inflation-adjusted dollars, than the average salary that a Baby Boomer had at the same age. Although generally Millennials are off to a rough start, there may just be hope for the future.

First, let's assess the biggest areas where Millennials are failing. Then we can take a look at what might give Millennials hope fore the future.

The Balance Sheet Of An Everyday Millennial

The vicious cycle of spending and consumption that follows societal expectations is leaving Millennials in a difficult situation financially. It is unattractive to live with your parents, drive an old car, and wear old shoes and clothes, so we don't. Instead Millennials have an ever-present pull towards consumption because most of their friends and family mistakenly judges success by your possessions. According to modern society you must be broke and failing if you do not own nice things. This is one of the most pervasive fallacies of the West in the 21st century.

Displaying a high social status is not a measure of success. I would argue that conforming to societal expectations of increasing possessions by giving into unnecessary spending behavior to impress others is borderline pathological. 

So how has this absurd idealism and pathological societal expectations impact the average Millennial?

• Millennials across the U.S. carried an average of $4,712 each in credit card debt in Q1 2019 - Source: Experian
  • Older Millennials (age 38) carry more debt than younger Millennials (age 22) at $6,675 and $2,288, respectively (Source: Experian). Older Millennials simply have had more time on their "spending journey" than younger Millennials. 
• Borrowers age 25 to 34 $497.6 billion in outstanding student loan debt for about 15.1 million borrowers. This translates to an average student debt of around $33,000 dollars for each borrower according to Forbes.

Where Do Millennials Shine?

Perhaps Millennials demonstrate the most resilience out of any prior generation. Recall that nearly every young person in the Millennials generation entered the workforce during The Great Recession, or otherwise one of the greatest economic downturns of any of our lifetime's. 

To make matters worse, when Millennials were supposed to be experiencing stability typical of approaching or entering your 30's, a had a pandemic hit. During COVID-19, the unemployment rates have spiked sharply. Another economic downturn was bestowed upon this generation making their increased debt and financial obligations even more difficult to combat.

Millennials also tend to attain higher education, specifically college education. The downside to this is the ever-increasing student loan debt but there at least demonstrates the continued resilience to endure a 4 year liberal arts education and at least give themselves a crack at becoming more enlightened (although this doesn't always happen).

Another positive attribute is the entrance of women into the workforce. According to the Pew study, In 1966, when Silent Generation (born 1928 to 1945) women were between the ages of 22 and 37, only 40% of the women were employed. Compare that to today where 72% of Millennial women are employed. With increased participation in the workforce, families are at least given the chance to earn more money than prior generations, although this has not yet proven to be true largely due to two significant economic downturns during the earliest earning years of a Millennials life.

Despite the woes of the Millennial generation they do demonstrate some additional positive attributes:

• A greater willingness to save than older generations (source)
• Earlier participation in retirement plans compared to previous generations (source)
• Greater confidence than previous generations in facing difficult financial situations (source)
• Greater tendency to spend on experiences compared to material possessions (source)
• They move less often thus reducing total transaction costs (source)
• Start families later in life which could increase the probability of starting a family from a position of financial strength (source)

In Summary: The Potential For Millennials

I believe overall the potential for Millennials in the future is great despite previous history treating them unkindly. Millennials demonstrate their resilience in the face of increased student loans, higher costs of living, The Great Recession, and now a pandemic. We must encourage the entire Millennial generation to continue to increase their financial wit through reading, researching, and asking prudent questions. They have demonstrated that they are willing to ask for help, but this is when the rubber meets the road.

There is hope in the future yet as long as we continue to grow stronger and wiser with our finances and realize that their still may be many challenges yet to come.