There are so many opinions about millennials and how they are either shaping or destroying our economy.
Recent news headlines suggest millennials are being too thrifty, and thereby killing consumerism. Others say millennials are ruining their chances of buying a home and incur more debt by overspending on luxuries, lattes and avocado toast.
While overgeneralizing a select group is rarely accurate, in order to understand millennial spending habits and risks, we have to examine the actual age range and economic climate surrounding the individuals called “millennials.”
If you just want the basics, the millennial age range is roughly 18-38 today. Millennials were born between 1982 and 2002.
Note, this is starting to change a bit on the low end - with many people calling those born after 2000 Xennials.
Let's talk about the millennial age range a little more and why there are flocking to services like:
Who Qualifies As a Millennial and Who Are The Millennials?
There are conflicting opinions about the actual age range of millennials. Some say that people born between the early 1980s – early 2000s are categorized as millennials, while the majority agrees that those born between the 1980s- mid 1990s are millennials.
Census bureau results provide that that the millennial generation is the generation of children born between 1982 and 2002, some 81 million children who have taken over K-12, have already entered college and the workforce. This generation will replace the Baby-boomers as they retire. Other sources suggest that the cutoff date for millennial is 2000.
We put the exact date range of millennials as those who are 18-38 today - basically today's college students to 38 year olds. That's a big, big range.
Although there is no consensus on the exact years the actual generations begin and end, millennials are usually born between 1982 through 2002. They were born before computers and cell phones became widespread. But it's important to note that there are really three groups of millennials: those that graduated before the Great Recession, those that graduated during the Great Recession, and post-recession graduates. This has directly impacted the average millennial net worth.
Aside from technology and the recession of 2008, the events of September 11, 2001, also known as “9/11” was the most generation defining moment for millennials in the United States. The reasoning for the cut off date of millennials stems from the theory that individuals born after 2002 were not old enough to understand or be impacted by 9/11.
Millennials have a tendency to spend money on experiences rather than material possessions. These “experience” centered spending habits have allowed for the creation and growth of businesses such as Airbnb, which are centered around avoiding high hotel costs.
Also, millennials are willing to forego some of the basic luxuries in order to stretch their dollar for spending on experiences by using ride share services such as Uber. Aside from ensuring safety while enjoying the nightlife, rideshare services help reduce transportation costs while being mindful of deceasing the carbon footprint.
Millennials are also big side hustlers. They embrace the work from where ever, when ever mentality, and are great at using the online economy to their benefit.
Common Stereotypes About Millennial Financial Habits
There are numerous conflicting stereotypes surrounding the financial habits of millennials, as this continues to be a hot topic:
- Millennials are big spenders. Historically, the "younger" generation has always been seen as frivolous and spending too much. This is not the first time that the older generation points the finger at the younger generation. Some experts suggest that high spending and debt combined is causing millennials to move in with their parents.
- Millennials don't save enough. Millenials are actually good savers, saving over 5% of their salary for various reasons such as emergencies, big purchases, as well as retirement. The recession is probably a huge motivating factor in saving for the future. Recent studies from Transamerica Center show that 75% of millennials save for retirement.
- Millennials don't spend enough. Many retailers complain that millennials are responsible for the decline of the retail industry and closure of department stores. The majority of millennials came of age during the great recession of 2008 and as a result, frugal habits have ingrained in their psyche out of fear and unrest faced during this financial crisis.
- Millennials are drowning in debt. Americans owe more than $1.4 trillion in student loans and the majority of that debt belongs to millennials, according to a survey of 1,000 Millennials by ORC International. While millennials may be saving their money, the majority of their income is spent on repaying debt, resulting in depleted savings and lower disposable income. That's why we recommend services like Pathrise that help millennials get higher paying jobs earlier in their career.
- Millennials are financially unable to purchase a home. While millennials are saving their money for retirement and their first home, debt makes it difficult for millennials to buy their first home right away. Aside from that, many millennials are waiting to buy their first home until they are financially stable, even before they get married. While the rise of debt is one factor in the delay to buy property, many millennials have a desire to discover one's true self and search for identity and meaning before settling down.
Millennials and Student Loan Debt
This relates directly to whether most millennials go to college, and more importantly, whether or not they complete their college education.
The risk for accumulating debt at an alarming rate is especially high for those who do not complete college because traditional jobs in the higher pay range generally require some college education. At the same time, many millennials regret their pursuit of a college education.
While some studies suggest that most millennials have a good handle on student loan debt, the majority of millennials have some of the highest student loan debt rates in history.
Check out our study on the average student loan debt by graduating class.
When it comes to money, millennials do have some of the highest student loan debt rates of any generation in history. The average millennial has over $30,000 in student loans. Millennial student loan debt affects all of us because it has a direct impact on our economy.
Ultimately, these students in debt will see slower growth in their savings, causing further delays in starting a business, starting a family, or buying a home. Also, because the majority of these loans are federal loans, they will add to the overall national debt.
Some millennials have resorted to desperate measures, accepting jobs with low pay in hopes of student loan forgiveness, including seeking employment at Red Lobster in mistaken hopes of eliminating student debt. There are a wide variety of volunteer programs that offer student loan debt reduction, such as AmeriCorps, the Peace Corps, and career specific loan forgiveness programs. If you are serious about resolving your student loans and have aspirations for a public service career, then public service loan forgiveness training will be a huge asset to helping you get and maintain eligibility while you take control of your debt.
Final Word
Whether you believe millennials are financially responsible or not, the economic climate has created fertile ground for increasing amount of debt of all types, including student loan debt. While coming of age during a recession undoubtedly affects your spending habits, we have seen enough evidence on both sides to suggest that millennials are financially responsible and yet still encumbered by significant debt.
Also, share your experiences and questions in the comments section below.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.