Entitled. Spoiled. Annoying. Those are just a few of the adjectives that have been used to describe today’s young adult. For good measure, let’s add “basement dwellers.” But there are bright spots. As it turns out, Gen. Y is far better at saving for retirement, emphasizing social consciousness, and being more careful with long-term purchases than boomers.
This point is particularly instructive considering that the bulk of the Gen Y cohort was entering the workforce when the Great Recession arrived in 2008.
“There are two parts to the ‘Great Recession Effect,’” explained Dowell Myers, a demographer at the University of Southern California who studies urban growth and societal change. “One part [of the effect] is entry level jobs, which were so terrible. I know this from on the ground experience because my kids are Millennials, and they graduated in the teeth of the recession. I saw what they had to cope with.”
The second part is the housing market, that although is recovering, has also become a behemoth in many metropolitan areas as a result of overall housing shortages. “[This] is the last part of the recession which we are going to recover from, because it had a lasting damage to our housing production system,” Myers said.
It has been nearly 10 years since a massive U.S. housing crash tanked the economy and severely curtailed opportunities for a new generation of adults. Today, those adults are finally starting to see some stabilization, but the consequences can still be felt. Gen Y’s attitudes on everything from academia to retirement are particularly telling.
To Buy or Not to Buy?
Real estate is ranked the top investment among Americans, according to the most recently available Gallup numbers. Most Americans still consider a house to be a better investment than stocks, gold or savings accounts. This is true for Generation Y, Generation X, and Boomers alike — which points to the simple fact that the fundamental desires of Millennials aren’t all that different from their parents’.
“One of the more recent discussions that we hear about millennials is that the most important value proposition for them is the word ‘lease,’” said Rob Lapsley, the president of the California Business Roundtable. “They’re not going to own necessarily a car. If they do, it may be a lease. But we’re now hearing it in terms of property ownership.”
“One of the more recent discussions that we hear about millennials is that the most important value proposition for them is the word ‘lease’”
To be fair, when it comes to vehicles, monthly payments and technological improvements are often going to determine the merits of buying or leasing — particularly among younger Americans. Further, with automobile manufacturers capitalizing on lease payment deals, it makes more sense that Millennials would be more amenable to leasing a car since it often fits budget needs and cars aren’t long-term investments.
To ascribe the same model to housing isn’t so easy. It’s not that Millennials don’t want to buy homes or that they’re doing a poor job of saving; it’s that the market shakedown in 2008 had far-reaching implications for today’s young adults. Indeed, housing costs today exceed pre-2008 housing bubble numbers.
Additionally, much of the problem for younger would-be buyers stems from the sheer cost of a home and how hard it is to reach down payment in a major metro area. While buying is cheaper than renting in at least 42 states, Millennials still tend to be careful about big purchases and cope with much slower wage growth than previous generations. That’s going to mean less money for a home their parents would have paid a fraction of the cost for.
Seriously Saving for Tomorrow
Millennials today earn $2,000 less per year than their parents did at the same age. Yet despite the disparity in pay, Gen Y is ahead of the curve on budgeting, according to data from T. Rowe Price, a global investment management firm. Millennials aren’t just likely to budget and live within their means, but they’re showing signs of increasing 401(k) savings at higher rates than boomers.
Millennials today earn $2,000 less per year than their parents did at the same age. Yet despite the disparity in pay, Gen Y is ahead of the curve on budgeting.
These numbers fall in line with other studies.
To explain this fiscal responsibility, it’s worth keeping in mind that roughly 34 percent of Millennials are saddled with a student loan debt. But even with this huge amount of student debt they’re still saving 5.5 percent of their salaries for retirement.
And a Baby Makes Three
Millennials want marriage and a family. Yet they’re delaying doing both. Gen Y may be different in terms of development and attitudes, but that’s not necessarily bad. Having children later than people did in the 1960s allows individuals to get more education and more along much further in their careers when they’re younger. More than half of Millennials (59 percent) have never married; 9 percent are in domestic partnerships.
Millennials want marriage and a family. Yet they’re delaying doing both.
Despite the societal implication, Millennials have started to have kids, albeit at lower rates than their parents or Gen Xers.
“That helps them be more flexible early in career, but likely results in less flexibility later in their career,” said Jennifer Deal, a senior research scientist at the Center for Creative Leadership and an affiliated research scientist at the Center for Effective Organizations at the University of Southern California. “I think it’s impossible to tell whether the long-term impacts of some of these societal shifts are positive or negative now.”
While Millennials are different than their parents, older siblings, and grandparents in some ways, their desires are often on par with other generations. They want to save for a rainy day, get married one day and have children. They have, however, been sharply impacted by one of the greatest economic downturns in modern history. And yet despite those setbacks, they have slowly begun hitting milestone events.
All of this suggests that despite getting a bad rap. Millennials are actually exercising a lot more fiscal responsibility, long-term planning, and foresight than we give them credit for.
Reut R. Cohen (@ReutRCohen) is a journalist, adjunct professor, and a communications specialist for the largest housing trade group in California. She can be reached at firstname.lastname@example.org.