As it turns out, the often-analyzed Millennials may be deserving of a new nickname: the paycheck to paycheck generation. According to a new survey by Charles Schwab, Millennials more than any other generation, feel the least secure when it comes to their personal finances. In fact, according to the report, only 32 percent of respondents aged 23 to 38 feel financially stable. The rest feel like they’re barely getting by.
Causes of financial pressure
In evaluating the details behind how Millennials spent their earnings, one thing was clear: Millennials owe impressive amounts of debt despite the fact that their wages are similar to Gen-Xers wages at the same age 17 years previously. At the top of this list of debt are student loans which the Pew Research Center reports at a median amount of $19,000. This is 50 percent greater than the student debt that Gen-X ers held at the same age. Millennials also appear to be burdened by heavy levels of credit card debt which could be caused by a variety of factors. For many, the costs of housing, food, clothing, health insurance, and other necessities have risen faster than what they could take home from their employers.
Overspending also comes into play as part of a discussion on Millennial financial pressure. In the survey, Millennials reported they spent $478 each month on non-essentials. This is less than what Gen-Xers reportedly spent but higher than Baby Boomers. It is important to give this trend some context. Gen-Xers are likely to be at the peak of their earnings years and could be spending more while Baby Boomers may be cutting back as their family responsibilities lessen and they near retirement. It is also worth noting that people who are under financial stress from things that are outside of their control, like Millennials may be, have been known to make impulsive decisions as a result.
Causes of spending habits
What causes Millennial spending pressures? Broader economic forces including stagnant wages, increasing college and graduate school tuition, and rising costs for clothing, food, and healthcare, explain some of the spending patterns. When it comes to spending on necessities the question becomes more complicated. It is possible that social media has influenced consumers’ need to keep up with the latest products, services, and experiences. The Internet followers’ fear of being left behind on the next great trend, trip, or other adventure. While their grandparents may have felt the need to “keep up with the Joneses,” Millennials may be more afraid of missing out and are spending more because of it.
Comparisons to other generational groups
How does the financial insecurity of Millennials compare to other generational groups? Overall, 59 percent of Americans classify themselves as living paycheck to paycheck. After Millennials, Gen X-ers are the group that appears to be feeling the most amount of financial pressure with a full 60 percent of respondents in that group who said they felt they lived paycheck to paycheck. Generation Z and Baby Boomer respondents came in at the mid to low 50 percent range when asked about their financial insecurity.
As a follow up to evaluating statistics on Millennial financial pressure as compared to other groups, it is interesting to note that the Pew Research Center found Millennials are taking longer to get married and/or form their own households and may, in fact, continue in the household they were raised in. These are tremendous lifestyle shifts which are worth keeping a close eye on. In the future, it will be interesting to see if Millennial financial insecurity resolves or if succeeding generations fall into the same situation.