Millennials and Money: A Volatile Relationship

Millennials and Money

Millennials have been given a bum rap. They’ve been blamed for declines in the auto industry, the housing market, even the diamond trade — but not for the reason you’d think. Pundits point to Generation Y’s ideology as the problem, dubbing them cheap, or worse, unconcerned with the impact their spending habits have on the economy.

While it’s true that many members of Generation Y are wary of traditional American capitalism, economists who label them as apathetic seem to be blatantly ignoring the elephant in the room.

And it’s a sizeable beast.

Millennials and Long Term Debt

Generation Y isn’t broke — they’re practically destitute. Student loan debt has crushed the millennials, and most are struggling just to breathe.

Let’s look at some statistics on millennials’ long term debt:

  • Two-thirds of millennials aged 23 to 35 have at least one source of long-term debt, while one-third have more than one source. [Filene Research Institute]
  • As of 2016, more than two thirds of college students graduated with debt — about $35,000 on average. [Time]
  • 67% of millennials report they did not receive adequate information about loans before taking them. [Yellowbrick]
  • Two out of five student loan borrowers are delinquent within the first five years of repayment. [Institute for Higher Education Policy]
  • 54% percent of millennials over the age of 30 are worried about repaying their student loans. [PricewaterhouseCoopers]

One of the most outrageous figures is this: Outstanding student loan debt in the United States currently amounts to over $1.4 trillion. As Yellowbrick pointed out, if the U.S. government were a private company, it would be the most profitable in the world, purely from student loans.

This overwhelming student debt goes on to cause further debts. Millennials unable to make payments turn to personal loans or credit cards. The cycle continues as their credit scores fall and payments skyrocket.

Millennials and Credit

Overwhelming long term debt has created a credit crisis for Generation Y. A recent survey from the American Institute of Certified Public Accountants found that around half of millennials rely on credit cards to pay for basic daily necessities such as food and utilities. What’s more, over 25% of them have late payments and are dealing with bill collectors.

Late payments, high debt to income ratio, and a lackluster job market — in combination with an outdated credit reporting system — have severely impacted the ability of Gen Y to achieve the financial stability they need to reach the milestones that previous took for granted, such as owning a home, getting married, and starting a family.

In a survey conducted by American Student Assistance, respondents explained just how much student loan debt affected their lives.

  • 27% said they found it difficult to buy daily necessities because of their student loans
  • 63% were unable to purchase more expensive items, such as a car
  • 75% indicated that student loan debt affected their decision or ability to purchase a home
  • 29% said that they have put off marriage as a result of their student loans
  • 43% said that student debt has delayed their decision to start a family
  • 73% said they have put off saving for retirement or other investments

Unable to purchase cars, homes, or even start families, many millennials are understandably distrustful of the capitalist system in general — a feeling that colors even the smallest purchases they make on a daily or weekly basis.

Millennials and Spending

Generation Y watched as their parents purchased material goods in order to show off their success, and subsequently ended up drowning in debt. They watched the housing market, and the economy, crash, causing people to lose their houses and nest-eggs. They watched the unemployment rate skyrocket — seemingly in tandem with college tuition.

To say it left a bad taste in their mouths may be an understatement.

More and more millennials are determined to spend their disposable income on experiences rather than material goods. Travel, dinner with friends, concerts — events that create memories — are for more appealing than a flat screen TV or a speedboat. When they do make material purchases, they go for brands who are authentic and socially conscious vs. those who shove advertisements down their throats.

And yes, millennials do spend less, but it’s because they make less. It’s not that they don’t care, it’s simply that they cannot afford things on the same level their forebearers could.

Where Do We Go From Here?

The future is vague and hazy for Gen Y. Saving and investing for retirement is hindered by debt and low income — and social security seems almost laughable. American millennials haven’t cornered the market on suffering; their British counterparts face massive debt and pension fears as well. But what’s to be done?

What millennials really need is one of two things: student loan forgiveness, or the ability to refinance said loans for a lower interest rate. Once they have money in hand that isn’t earmarked for outrageous debt repayments, Generation Y can look forward instead of back. They’ll be able to get married, buy homes, cars, and flat screen TVs. They’ll finally be able to do the kind of spending that’s capable of boosting the global economy.

The future is truly in the hands of our leaders. Here’s hoping that they’re listening.

 

Liz2About the Author: Liz Greene is a writer, marketing professional, and history geek from the beautiful City of Trees, Boise, Idaho. You can follow her on Twitter @LizVGreene or catch her latest misadventures on her blog, Instant Lo.