Understanding Millennials and Their Money

I’m standing on the last leg of my 20s and have yet to make any of the following major milestone purchases – a car, a home, a baby (not the baby itself obviously, but the significant investment that goes into having and raising it). The media might label my reluctance to adapt these traditional life stage expenses prior to thirty as some kind of “perma-childhood” characterized by the helplessness, selfishness, and entitlement that have largely (however limitedly) come to define my generation – millennials.

For my part, I find the idea of an “appropriate” schedule for life events ludicrous, but perhaps more importantly, a perfect illustration of the pervasive misunderstanding of millennial reality. To understand millennial behavior is to appreciate the context in which millennial choices are made- or deferred.

Understanding Millennials: Unemployment and Underemployment

In 2014, six years after the recession and several years into the would be working lives of many millennials, the percentage of unemployed young adults was approximately twice the national average. In addition to the high numbers of young people out of work, a 2012 report from the Federal Reserve Bank of New York found that about 44 percent of young, working college grads were underemployed. I still remember how relieved I was to find that I wasn’t the only 2008 grad working a babysitting gig that could’ve just easily been done by a high school junior.

It turns out graduating into a weak labor market has implications that last for years. I’ve certainly seen the effects of long-term financial insecurity manifest among my peers and a 2009 study out of Yale showed that my anecdotal experiences and observations were not singular. Researchers found that students who graduate during a recession earn up to 10 percent less after a decade of work than they might have otherwise.

While the economy may be improving in time to save younger millennials from that same fate, my experience and those of my older millennial contemporaries have largely reflected those findings. Even those who pursued more “traditional” and marketable career prospects are just starting to find their financial footing and get a grasp on their lives. Not necessarily because of entitlement (though I won’t dismiss it entirely), but because they’ve had to channel far more of their resources to achieve some semblance of stable and sufficient income, let alone success.

Understanding Millennials: Retirement 

An often-overlooked implication of the millennial unemployment and underemployment debacle is the effect on retirement planning. Prior to full time employment and without access to employer sponsored retirement plans and an HR department to walk individuals through the steps of enrollment, the onus of retirement planning rests largely on the individual. That means in between job interviews, unpaid internships, and part-time shifts at Starbucks, millennials need to set up their own retirement accounts or do without- an option many seem to have favored, if only for the sake of simplicity.

By the time many young professionals are able to secure employment that comes with retirement benefits (if they ever do), they’ve already missed out on valuable years of investment growth as well as foundational financial literacy that comes through the practice of implementing a long term financial strategy.

The millennial reluctance to invest towards retirement (or anything for that matter) has its own contextual causes. Having experienced extreme job volatility as a result of the floundering economy and seen the effects of poor market conditions on their parents’ employment, portfolios, and retirement prospects, a fiscally conservative, depression era mindset has taken hold among gen Y workers.

According to a study by the Brookings Institution, more than half of people between the ages of 21 and 36 have their savings parked in cash. Instead of growing their money through aggressive investments like stocks, millennials favor traditional bank savings accounts and CDs. While these latter accounts carry minimal risk, they also pay little to no interest- which can actually leave millennials more vulnerable, with the value of their savings eroding due to inflation.

Understanding Millennials: Debt

Let’s not forget the debt! The average student loan debt for graduates of public universities doubled between 1996 and 2006. Those who took out student loans as eager 18 years olds did so anticipating finding a job upon graduation that would help them pay off; instead, they found themselves in the worst economy since the Great Depression, struggling to find any employment.

With opportunities minimal and wages stagnant, just keeping up with five and six figure student loan payments is enough to create serious financial strain – forget retirement planning or buying a home.

Understanding Millennials: Opportunity

While it’s important to understand how these contextual factors shape millennial behavior, I don’t advocate using them as a way to justify or play victim.

Yes, millennials face real financial and economic challenges that have been largely misunderstood and underappreciated, but they also have unprecedented access to information, resources, and low cost opportunity.

You can set up your own retirement portfolio with as little as $100 month.

You can start your own business with minimal investment or risk.

You can answer just about any question in the ten seconds it takes to type it into Google search.

Hardship is the birthplace of innovation, but only for those who are willing to carve their own way and try new approaches.

The old formula for success and all its’ “accepted” timelines is outdated. So go ahead, delay traditional “adulthood”, but not out of helplessness, do it consciously as you propel yourself forward, finding new, innovative ways to create your own powerful future- financial and otherwise.

This article by Stefanie OConnell first appeared on thebrokeandbeatifullife.com and was distributed by the Personal Finance Syndication Network.