Blog – The dream of getting a job and having your own apartment used to be all but a fact for young adults entering the workforce. Now, it is all but a dream for most. Millennials are best known for living with their parents far past the previously “acceptable age” and spending too much money on avocado toast at brunch. While it is easy to look at this generalized information and pass judgment, it’s important to look at the data.
The cost of living has skyrocketed over the last 50 years, while wages have remained stagnant. At the same time, housing costs have soared, as well as the cost of education. While it is easy to see there is a problem with millennials and money, the problem may not be millennials themselves, but the economy and the socio-economic situation they find themselves in.
Saving and Splurging Differently
You can tell a lot about a person by looking at their spending habits. While previous generations were expected to put aside savings for emergencies, many millennials often spend a large portion of their check paying off their student loans. In worst case scenarios, they might have to make a high monthly payment for decades, making it impossible to save money for emergencies, let alone vacations and nicer cars.
This has affected the way millennials spend their money. They typically care less about buying material objects and are more likely to spend money on experiences. While this can mean going on road trips or saving up leftover money for an adventure, it also means enjoying the small things in life, like overpaying a little bit for avocado toast.
While older generations tend to criticize millennials for this, even going so far as to imply that it’s the reason millennials can’t afford to move out of their parent’s houses, the truth is that because they tend to have less money, they sometimes need to splurge on smaller items.
Rethinking the Future
The differences in their spending habits also change the way Millennials live their lives. Students loans can make buying a home a difficult — if not impossible — task, as they can inflate your debt to income ratio. This is not only part of the reason millennials live with their parents longer, but it is also a reason they rent houses rather than buy them.
Debt can also influence the ways that millennials plan for emergencies. While financial experts recommend that people save enough money to cover their expenses for three to six months, living paycheck to paycheck can make it difficult to save anything at all. Millennials also tend to stay on their parents’ medical insurance as long as they can, and don’t opt for supplemental insurance, such as life or home insurance.
Though supplemental insurance isn’t necessary, not having it can strain wallets even more in emergency situations. For example, house or rental insurance can come in handy for situations such as leaky roofs. While this problem isn’t huge, not getting it fixed can lead to larger problems such as structural damage to the wood or mold forming in the walls, both of which can be very expensive — and essential — to get fixed.
Another way millennials are planning out their lives differently is with having children. Not only are they having children later in life, but many are going so far as to choose to not have children at all. This is no surprise, as the cost of raising a child can be astronomical. With their other financial struggles, it only makes sense that they would delay or refrain from taking on the responsibility of another human being.
The high costs of living and increased weight of debt on their shoulders make millennials a vulnerable group for predatory lending. Not only do most young adults who sign on for student loans not fully understand what it means to take out a loan, the lack of education in the subject can make them easy prey for predatory lending.
This can lead to a lack of credit, which means that millennials need to find other ways to get approved for things like renting a house. Usually, this entails getting a cosigner or agreeing to higher interest rates but can be dangerous because there is a lack of regulation in the lending industry.
Though being a millennial often comes with risks and uncertainty, the generation is best known for breaking tradition and living life their own way. Though they are affected by debt in almost every area of their lives, they also try to make the most of it and live the best life they can, just as Baby Boomers and Generation Xers have.