The members of Generation Y could be forgiven if they started referring to themselves by a new name: “Generation Why Me?” No other recent generation has endured so many challenges during the early years of their lives.
Gen Y ? also known as the Millennial Generation ? consists of the 70 million Americans born in the 1980s and 1990s. They’ve already survived economic crises, terrorist attacks on U.S. soil, environmental calamities such as Hurricane Katrina, and ecological disasters such as the BP oil spill.
As a result, they’ve had to become more resilient and more frugal than any generation since that of their great-grandparents, whose lives were shaped by the Great Depression and World War II.
Nowhere is the impact of the recession felt more acutely than in the lifestyles of today’s young adults. While new technologies have boosted productivity, and while global outsourcing has cut the costs of many products, the combination of these enhancements has been a curse to people who are seeking jobs.
As even the Millennials who have found work have quickly learned, job security in the workplace today is as obsolete as a manual typewriter is in the modern office.
According to the Bureau of Labor Statistics, the unemployment rate for people between the ages of 20 and 24 is now 13.2 percent. That’s nearly double the rate of 7.7 percent as recently as 2007 ? and it’s not just that jobs are hard to find.1
Because of soaring tuition costs, the average college graduate who took out student loans is burdened with more than $25,000 in debt. Those who graduate with advance degrees can end up with six figures of loans to repay. The outstanding debt from U.S. student loans totals more than $1 trillion.2
The combination of high levels of debt and low levels of income has put an entire generation at an economic disadvantage compared to earlier generations.
Consider how wide the wealth gap has grown in just one generation: According to the Pew Research Center, in 1984, the average household headed by an American 65 or older had 10 times as much wealth as a household headed by an American 35 or under. But by 2009, that gap had grown to 47 times as much wealth.3
How has this affected the Millennials? One 2010 study, called the Western Union Global Payments Money Mindset Index, found that half of Millennials reported feeling more stress about their financial obligations in the previous six months, and more than one in three said their economic situation had grown worse over that span.4
Other findings from the study were:
- 35 percent of Millennials have borrowed money from family members or friends.
- Almost 30 percent admit to having difficulty managing their spending.
- More than 25 percent of Millennials have been rejected for a loan or line of credit.
It’s no surprise then, that with less wealth, more debt, and less job security, today’s young adults are delaying making the big financial commitments that people traditionally leap into during adulthood. Many Millennials are in no hurry to get married, have children, or buy a home because they simply can’t afford to do so.
In fact, 34 percent of adults in their late 20s and early 30s have put off marriage and/or parenthood. It’s not just marriage licenses that Millennials are shying away from; according to the New York Times, fewer of them are getting driver’s licenses, possibly because they can’t even afford to buy a car.5
But it’s the Millennials’ inability to buy or even rent their own homes that is particularly troubling. Many Millennials are out of work, or struggling to make student loan payments, or both.
As a result, the Pew Research Center found that growing numbers of young adults fit the definition of “Boomerang Kids”: They have moved out of their parents’ homes only to move back when they couldn’t make ends meet by themselves.6 In fact, 39 percent of Americans aged 18 to 34 say they either live with their parents now or moved back in temporarily in recent years.
Breaking down this generation into smaller age groups, the proportion of young adults who are either living with their parents now or have moved back in with them during the past few years are:
- 53 percent of 18- to 24-year-olds
- 41 percent of those aged 25 to 29
- 17 percent of those between the ages of 30 to 34
To illustrate how unusual this is, consider that, among young adults aged 25 to 34, 21.6 percent were living with their parents, rather than in their own apartments or houses, in 2010. That’s up from 15.8 percent in 2000, and it is twice as many as the 11 percent in this age group who lived with their parents in 1980.
However, these numbers are not that much different than what the “Silent Generation” experienced coming out of the Great Depression and World War II. Digging deeper, Pew also found that few Gen Y Boomerangers are “unhappy parasites.”
Consider these facts:
- 78 percent of Boomerang Kids are satisfied with their living arrangements.
- 77 percent have a positive outlook about their future finances.
- 48 percent have paid rent to their parents.
- 89 percent say they have helped with household expenses.
- 72 percent say it’s either been good for their relationship with their parents or made no difference.
Nevertheless, while adult children who boomerang back into their parents’ homes can buy time to pay off their student loans and save for a down payment, what the research does not address is that the arrangement may create longer-term economic problems, for two reasons:
1. The economic downturn was triggered largely by the meltdown in property values, and a major step toward a recovery must be an increase in the demand for housing. As long as tens of millions of young adults can’t afford to live on their own, the demand won’t materialize as quickly as it should.
2. If parents are supporting their adult children instead of investing for their own retirement, they will be in for an unpleasant shock when they reach their late 60s and early 70s and find they haven’t saved enough to support themselves.
Based on this trend, please consider the following forecasts:
First, Generation Y’s experiences of financial hardships will teach them important lessons that will be crucial to their own standard of living later in their lives, and to the overall economy.
For example, Millennials are learning how to delay gratification by saving up for a new iPhone rather than putting it on a credit card, or by living with their parents or renting until they can afford to buy a home of their own. According to the Chase Slate-U.S. News Consumer Monitor7 survey, young adults are two to three times more likely than their parents and grandparents to recognize the value of saving money, managing their finances, and setting goals for the future.
Second,because many Millennials have lowered their expectations for material goods, they will experience less dissatisfaction later in life.
Instead of pursuing bigger homes, pricier cars, and the latest shiny device, young adults are learning to find fulfillment in a networks of friends, both in the physical world and online; they’re making career choices based on work-life balance as well as opportunities for learning and growth; and they’re developing their spiritual lives. All of these priorities suggest they will enjoy a greater sense of personal happiness.
Third, employers that address the Millennials’ priorities will attract and retain the most talented members of this generation.
Because many Millennials want to work for companies that are environmentally friendly and socially responsible, organizations will have to position themselves in this way both during the recruiting process and in their marketing campaigns, which should target employees as well as potential customers.
Fourth, Millennials will exploit advantages that previous generations never had.
Through social networking sites like LinkedIn and Facebook, it’s easier than ever to use a wide network of friends, colleagues, former classmates, past co-workers, and friends of friends to find new jobs. The opportunities for entrepreneurs are endless, with the cost of starting a new business online virtually free.
Fifth, members of Generation Y who are able to save money? whether by living with their parents or by living frugally on their own ? are in a prime position, if they invest in the stock market now, to participate in the next market boom.
According to research by T. Rowe Price, “Those who began systematically investing in equities in past severe bear markets were significantly better off 30 years later, than investors who began in bull markets.” In other words, the best time to start investing for the long-term is when the market is down, rather than when it is at the top.
References List : 1. Reuters, April 19, 2012, "Generation Lost? Millennials Come of Age." ⓒ Copyright 2012 by ThomsonReuters. All rights reserved. http://www.reuters.com 2. Ibid. 3. To access the Pew Research Center report, "The Rising Age Gap in Economic Well-being," visit their website at: http://www.pewsocialtrends.org 4. To access the Western Union? Money Mindset Index findings regarding the financial health of todays Millennials, visit their website at: http://ir.westernunion.com 5. The New York Times, March 10, 2012, "The Go-Nowhere Generation," by Todd G. Buchholz and Victoria Buchholz. ⓒ Copyright 2012 by The New York Times Company. All rights reserved. http://www.nytimes.com 6. To access the Pew Research Center report, "The Boomerang Generation," visit their website at: http://www.pewsocialtrends.org 7. For more information about the Chase Slate-U.S. News Consumer Monitor survey on the Financial behavior of young adults, visit their website at: http://multivu.prnewswire.com
