What Is the Financial Status of the Average Millennial?
Millennials, who came of age in the years surrounding the Great Recession, may be more financially savvy than previous generations, but that’s not the narrative we hear most. Millennials have been labeled as lazy and have received criticism for their irresponsible spending. Despite these notions, studies show that student loan debt, rising costs of living, and healthcare expenses are the reasons millennials fall financially behind previous generations.
While millennials are doing okay financially, they have less wealth and more student debt than their parents did at the same age. That greater financial burden is causing millennials to delay life milestones, such as buying a home, having children, or starting a business. These decisions may indicate that millennials want to achieve financial stability before making investments.
To get a clearer picture of the average millennial’s financial situation, we looked at how much millennials earn and how they allocate their income. Turns out, they aren’t spending all their money on pumpkin spice lattes and avocado toast.
Millennials are conscientious about saving and budgeting.
Millennials start saving for retirement earlier than previous generations. The average millennial begins setting aside money in a retirement fund at 24, while baby boomers didn’t start saving until age 33 on average, according to a report from Bank of America. 73 percent of millennials are saving, and of those that save, three quarters are putting money away for retirement.
Some millennials have gotten even more aggressive with their savings; almost one quarter already have $100,000 saved. And almost all millennials are aware that they’ll need to make sacrifices to achieve future financial goals; 90 percent said they’d forego other spending or take on more responsibilities to reach those goals, which included sacrifices such as cutting back on dining out or taking on a side job. And 73 percent said they’d rather live a frugal lifestyle in order to prepare for their future. Only 22 percent have adopted a “you only live once” mindset around spending money.
And it’s clear from the average millennial’s budget that they’re not spending excessively on leisure activities, at least not any more than their parents were. Spending habits are generally the same as they were for people of the same age in 1997, with roughly the same percentage of income going towards food, alcohol, and restaurants, a Deloitte study found.
However, they’re earning less.
An analysis of Census Bureau data found that the average salary for someone between the ages of 25 and 34 in 2018 was $905 per week, or about $47,034 per year. That’s estimated to be about 20 percent lower, when adjusted for inflation, than what baby boomers earned at the same age. And with rents skyrocketing in many of the nation’s big cities, many millennials are likely feeling the financial strain of living on a low salary with high expenses.
Millennials have not been able to accumulate as much wealth as previous generations, either. Since 1996, the net worth of adults under 35 has decreased 34 percent to under $8,000, according to a report from Deloitte. The report pointed to increasing non discretionary expenses, such as education and healthcare costs, as the reason for the trend.
And they’re saddled with debt.
Education costs have risen 65 percent in the last ten years, leading to a $1.6 trillion student debt crisis. Millennials carry an average of $36,000 in debt and devote 34 percent of their income to repayment. The greatest sources of debt for millennials are student loans and credit card bills.
It’s no surprise that many millennials feel that the financial burden of student debt does not outweigh the benefits of higher education. 44 percent of indebted millennials surveyed said college probably or definitely wasn’t worth the student debt they had to take on. For those who responded that college wasn’t worth the cost, more respondents were still paying off their debt than in the other group. But while the strain of student loan debt might make millennials feel that their education isn’t paying off, experts say higher education is still worth the investment.
So they’re getting help from their parents.
The financial struggle that millennials face is affecting their parents as well, since more millennials rely on parental assistance than previous generations. 15 percent of millennials live with their parents, while only 10 percent of Gen Xers did. Living at home is more likely for millennials without a bachelor’s degree.
Even millennials who live on their own require occasional or even frequent financial assistance from their parents. 53 percent receive some sort of financial help from their parents, with 37 percent of those getting money on a monthly basis and 59 percent asking for help a couple times a year.
And they’re delaying life milestones.
The financial burden of debt and rising costs have squeezed millennials so much that many are delaying important life decisions, such as homeownership and entrepreneurship. Only 43 percent of millennials own homes, compared to 51 percent of Gen X households at the same age.
And millennials are starting families later as well. 46 percent of millennials are married, a drop from 83 percent of silents married in 1968. And while birth rates have fallen overall, there have been slight gains for women in their 30s and 40s, indicating that young people are waiting to have children. In addition, millennials are twice as likely as baby boomers to delay career moves like entrepreneurship or leaving a job.
While it may be practical for the average millennial to put off costly life milestones, the choice to delay things like homeownership and entrepreneurship prevent millennials from building wealth as well.
As a result, they’re feeling pessimistic about the future.
With mounting debt and earnings that don’t keep pace with inflation let alone rising costs, it’s no wonder that millennials aren’t feeling hopeful about their financial futures. More than half of millennials think their personal financial status will stay the same or get worse, and only 26 percent are optimistic about the economy.
Entering the workforce post-recession may have disillusioned most millennials, but it also provided them with practical insights about personal finance. As a result, most millennials are making smart choices to secure a healthy financial future, even when that means making sacrifices.