The crisis generation: Millennials deal with another financial setback

Millennials often get a bad rap when it comes to making good financial decisions. Older generations like to criticize millennials for being slow to grow up and launch into adulthood.

But do these charges provide evidence of a generational flaw or is something else at work here that influences how millennials act?

A millennial is commonly considered to be a person born between 1981 and 1996. This means they are currently ages 25 to 40. The oldest millennials came of age around the year 2000, right as the Dot.com market bubble was bursting.

They saw the economic decline that followed and then had their attitudes shaped by the Sept. 11 terrorist attacks. The Great Recession and financial crisis that hit in 2008 waylaid the core of this generation.

Many who had regained their footing are now dealing with another crisis — the recession caused by the COVID-19 pandemic. This “crisis generation” has undoubtedly been influenced by the economic circumstances they have seen during their adult lives.

The compound effect of these economic hard times likely drives some of the habits that older generations find unappealing.

Recent research looking at this generation shows some key themes emerging about them.

▪ Employment loss and lower earnings. Millennials have been hit harder by job loss due to COVID-19 than other working generations.

A recent article in the Washington Post, using Labor Department data, showed that millennial employment declined by 16% in March and April of 2020, which was more than the older Gen X (12%) and baby boomers (13%).

The same article showed that millennials still have not gotten back to the same level of earnings that they had before the Great Recession. This means that they were already behind from a wages perspective — and the current rash of unemployment will only amplify that result.

▪ Less wealth accumulation: Millennials have accumulated less wealth than older generations did at the same age.

According to data from Pew Research, the median net worth of millennial households is about 40% lower than baby boomers and 17% less than Gen X at the same point in their lives. This trend is probably due to higher debt levels for millennials compared to prior generations. This is especially true for student loan debt.

A recent Harris poll found that 52% of millennials say that their savings have declined during the pandemic and 44% say that they either have no savings or do not have enough to cover a $400 emergency expense. This lack of reserves puts them in a precarious position to deal with any additional financial adversity, further eroding their financial health.

▪ More millennials live with their parents: Even before the current crisis, millennials were more likely to live at home with their parents than prior generations.

In 2018, according to Pew, 15% of millennials (ages 25-37) lived at home with their parents. The current pandemic is driving this trend higher, especially with younger millennials. Pew found that younger millennials (ages 24-29) living at home increased from 26% to 28% from February to July of 2020. Additionally, a TD Ameritrade survey of 2000 young adults in the spring of 2020 found that 39% of younger millennials (ages 24-29) indicated that they were planning to or had already moved back in with their parents due to the economic downturn.

This trend makes sense, of course, as higher unemployment and a lack of financial reserves leads people to rely on their most common safety net — immediate family.

Every generation has impactful events and hardships that shape their attitudes and circumstances. Recessions, wars, and crises all make their mark as people are forced to work through and overcome them.

Millennials are no different, but they have had to deal with more economically than prior generations. It will be up to them to claw back and overcome these challenges.

Hopefully, other generations can come to appreciate some of the difficulties millennials have endured and balance some of the criticism with some wisdom and encouragement.

Lucas Bucl is a CERTIFIED FINANCIAL PLANNER professional and member of the Financial Planning Association of Greater Kansas City. He is a principal at Aspyre Wealth Partners in Overland Park, where he helps clients define what success means to them, and then craft and execute a plan to achieve it.