Finance illiterates or unprotected consumers?
It is concerning how extensive research is somehow trying to prove that the millennial generation, which is taking over the professional and financial stage of society replacing the boomers, does not seem to be doing well for the economy. Those who were born between 1981 and 1996 in the US represent the biggest population in one generation of the country ever, and let’s allow ourselves to say that catastrophically, are not managing the financial duty of our times close to acceptable. But, this is questionable my friends.
120 million Americans aged 18-40 years old represent 38% of the labor force today and we are expected to be 75% of the US workers by 2030. It should be a wakeup call to know that out of this population at least 49% of us have insufficient funds to cover an emergency cost of $500 USD today. This is jaw-dropping. We have pushed the bar for household debt achieving a $12.7 trillion USD nationwide and we have added another couple of trillions on revolving credit. The highest peak of credit scores in history! On top of this, a recent college graduate will carry a $100,000 USD in student loans and could owe as much as $1,100 USD per month for the next 10 years of their life (This is half of the average income in the US and 250% above what boomers student loan cost used to be). This is another 1.5 trillion USD debt carried by 46 million students in the USA as of 2019.
And why is this credit moving so high and shredding our young pockets?
Incredibly, millennials are increasingly spending on experiences that no other generation had before, influenced by social media, such as traveling, eating in the trendiest restaurant, coffee (Hipsters and all tech-savvies are going crazy on arty-coffee lifestyle, blame it on Starbucks), ordering food, attending to live concerts and sport events, latest fashion clothing and electronic gadgets. And we call these priorities, along with our large education bill.
As well, millennials have proved to invest more than any other generation in our wellness, resulting in a peak of early homeowners that brings along repairing, refurbishing and remodeling expenses at a very young age. And it is true that millennials like to design and personalize our space very often. So, yeah, it could be that the economy is not being regulated fast enough to adapt to a world that our massive number of new adults are trying to build as early as possible today. We are assuming big obligations to achieve happiness too quickly and ignoring the consequences of dealing with costly living preferences with paralyzed wages.
Most of these living preferences are considered luxury by the boomers, but essential to millennials. LOL, it could be a matter of perspective between the system left behind by boomers and the new tech-led society behavior. Experts are strongly considering this as the open wound in the generation gap. Now, what could support this painful idea are the records on the cost of living being almost 200% higher for us than what it was for boomers. The income power of millennials has increased barely 6% in the last 30 years in the US. We are trying to achieve a certain lifestyle but at a very high cost.
How well-equipped with basic financial concepts are we? How adequate information we possess on our individual economic burdens? Do we understand and implement savings or even a retirement plan in the long run? These questions would often lead to general conclusions suggesting that there is a widespread level of financial illiteracy among our generation. This would mean that a lot of us do not have the ability to cover our basic needs and financial obligations, to save money and secure our financial future, and that we are also disabled for decision-making to effectively create and manage wealth to enjoy life, especially in vulnerable groups like young women, young African Americans and young Latinos. Nevertheless, these premises can tell us what we lack but not really explains why. If we flip the preposition, the other way around… It could be, instead, that the reasons for our financial shortages are that the economic structure inherited is not doing well for the millennials’ society needs.
Very few of us rely on the help of experts or financial advisors to make savings and investment decisions. I think more of us should start with that for guidance on how to bridge the gap. What do you think? What can be changed? Leave your comments; share your thoughts…