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How Much Money Do Millennials Make

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 11 minute read

Money Crashers conducted a poll and found that most millennials feel they have more difficult financial challenges to overcome than their parents had when they were the same age.

We polled U.S. citizens on their level of agreement with the statement, “My generation has the same potential to acquire money via investment as prior generations.”

There was a clear generation gap in how Millennials and Baby Boomers viewed the world.
53% of the millennials polled either partially or completely rejected the assertion. Contrast that with just 21% of baby boomers who shared the same sentiments. Sixty-three percent of boomers think they can increase their money just as much as previous generations did.

What Do the Statistics Say?

Millennials are clearly of the opinion that they are disadvantaged. Is that impression, however, justified? Is their standard of living lower than that of their parents? To illustrate, below are the results of our numerical analysis.

  1. Millennials Make Less Money

The average IQ of a millennial is higher than that of their parents. Pew Research Center reports that about 40% of millennials (those born between 1980 and 2000) hold a bachelor’s degree or above, whereas just around 25% of baby boomers do.

Nonetheless, despite having higher levels of education, millennials’ incomes are falling. New America has shown that millennials’ median annual income is 20% lower than that of baby boomers at the same age. That’s why it shouldn’t come as a shock that millennials have saved less money and amassed less wealth.

The median net worth of millennial-headed families was $12,500 in 2016, according to the Pew Research Center. This is in contrast to the median net worth of baby boomer-headed households of $20,700 in 1983. (adjusted in 2017 dollars).

Young adults (those born between 1980 and 1999) now account for about a quarter of the total population, although they have only accumulated $3.6 trillion in wealth so far, according to the Federal Reserve. At the same age, baby boomers controlled 21% of all national wealth.

  1. The Last Recession Has Left Millennials Scarred

The millennial generation came of age during the Great Recession, when the economy was in disarray and the job market was bleak. Young employees were particularly vulnerable during the slump.

The Bureau of Labor Statistics reported a 10.2% national unemployment rate in October 2009. Conversely, it was a staggering 15.6% among young adults aged 20-24. In contrast, the percentage among baby boomers between the ages of 45 and 54 was only 7.9%.

Mormon convert Melissa Gamarra, 25, calls Salt Lake City home. She is the owner of a company that focuses on internet business management. Gamarra claims that the recent recession greatly altered her perspective on the financial markets:

I used to have faith in the stock market, but the recession made me rethink that. Even more so now that I know the truth about how much of that catastrophe was caused by the carelessness of banks, stockbrokers, and criminal conduct. Personally, I use Acorns to invest, but my funds aren’t quite big enough to make a significant impact on the platform’s performance.

However, financial professionals stress the need of keeping emotions out of the investment process. Generation Y is hindered in their ability to accumulate money due mostly to their reluctance to take on financial risk. Professor of Finance at Creighton University’s Heider College of Business Robert R. Johnson thinks that investing in a diverse portfolio of common stocks is the best method to grow wealth over the long term. “The reluctance to take calculated risks stems from worries about an impending market correction.”

Despite the stock market’s recent recovery, studies show that graduating during a recession can have long-lasting effects. For example, they begin working for lower-paying organizations, which can have a long-lasting influence on the sort and quality of positions they retain throughout their careers, and they make less money than graduates who do so under more favorable economic conditions, even decades later.

A common misconception is that recessions last for only a few years. To those entering the workforce during a recession, however, these effects are lasting.

  1. Millennials Have Lower Social Mobility

College education was the traditional entry point for baby boomers and their parents into the middle class in the United States. You could major in anything you wanted. A four-year degree was usually a prerequisite for advancement. Having only a high school graduation was typically sufficient to get a good career that provided enough money to sustain a family. Only 26 percent of middle-class employees in the United States had some college education in 1970.

Now, however, such is not the case. The cost of attending college is little. When you graduate college, even with a bachelor’s degree, you still could not find suitable employment.

Albuquerque, New Mexico resident millennial Brice LaGrand is a great example of the generation. In 2013, he completed his undergraduate studies at Eastern New Mexico University, one of the most reasonably priced public universities in New Mexico. He decided to get an MBA in the hopes of expanding his career options. He has returned to a position similar to the one he held during his undergraduate years, that of hotel manager.

“I grew up in a tourist town where every employment was at a restaurant or a hotel,” he recalls. After relocating to Albuquerque in search of better employment opportunities, I found myself working as a temporary employee at yet another hotel for the better part of a decade.
LaGrand’s total debt from education is around $45,000. He’s supplementing his income by participating in the freelance sector. He has walked dogs, written ghost stories, cleaned homes, and even done aerial dance as a side gig. He’s making headway in his debt repayment, but it’s cost him a lot.

“It’s tough to locate reasonably priced, nutritious meals that can be eaten in between 14-hour workdays,” he explains. I haven’t seen my family for the holidays in five years since I haven’t taken a vacation in that time. Time and money have prevented me from attending many important life events, such as weddings, funerals, anniversaries, birthdays, and other celebrations.

According to the United States Department of Education, the cost of higher education has increased by more than a factor of three since 1980. Because of this, more millennials are taking on debt than previous generations were to qualify for middle-class employment. 

However, some people are finding out the hard way, like LaGrand, that even a four-year or graduate degree doesn’t ensure career advancement. The foundations on which the cost and value of higher education are based have shifted significantly.

  1. Many Millennials are priced out of owning a home.

Homeownership is a pillar of the American dream for many people. This is a way to put money to work over the long run and increase your net worth. With consistent mortgage payments, you’re able to increase your home’s equity. A portion of the profit made from the sale of your home belongs to you.

Many people in the baby boomer generation have adopted this tactic. They became adults at a prosperous time when many people were employed and big sums of money were spent on things like building infrastructure and creating new suburbs. Families earning middle-class wages may afford to buy a home.

The housing market is different for millennials. When compared to the cost of living, home price inflation has considerably exceeded income growth. Consequently, just 37% of the millennial generation owns a home. That’s 8 percentage points less than boomers did at the same age. Many twenty-somethings nowadays are renting, sharing apartments, or even moving back in with their parents since they can’t afford to buy a home outright.

The dream of homeownership is still strong among today’s youth. According to the data, they don’t change much in outlook from previous generations. Nine in ten millennials, the poll found, are eager to take the plunge into home ownership.

Adam Jacobs thinks his generation doesn’t get enough credit for the work they perform to justify the possibility of home ownership. He graduated from college in 2017, but he has had a hard time finding work related to his major. Finally, he was able to break into the industrial manufacturing industry by landing the position of Director of Public Relations at Powerblanket. Together, he and his family make their home in Rexburg, Idaho. He has found the local housing market to be competitive, especially for first-time buyers, even though Rexburg is not a very large city.

Housing in his area is “always just out of reach,” he adds. The housing market increases just as I get a raise. Even if I’m putting in more time and effort and bringing in more money, it seems like there’s no stopping the spiraling cost of living. It’s annoying to see a house for sale that hasn’t changed in two years but is now valued at $20,000 higher.

Jacobs is following the trend of his generation by renting rather than buying a home. Because of the scarcity of reasonably priced housing in the neighborhood, he has delayed making the switch to a starter house.

He argues, “Sure, developers are incorporating more starter home areas in their portfolio, but those houses are pricey and don’t fit within the category of beginning families. Instead, the only homes available at prices young families can afford are older ones that require extensive renovations. It’s awful that we have to contend with the previous owners of the house we want to buy in order to realize our goal of homeownership.

  1. Millennials are in charge of their own retirement.

Options for retirement have evolved greatly during the past few decades. Pension plans, which give a monthly income to retirees, were offered by many firms to baby boomers when they entered the workforce.

In the past, companies often avoided taking on the duty of providing retirement benefits for their workers. Workers were more likely to remain in their jobs because of the security pensions provided.

Over the past three decades, there has been a steady fall in the share of workers who are provided pensions. In 2018, just 13% of the working population had access to a pension plan. Pensions are still available for many people working for the government. However, 401(k) plans are ubiquitous in the private sector and are often paid entirely by employees. 

This implies workers are on their own to save for retirement and to bear the risk of any financial losses. While both younger and older workers have been impacted by this shift, many baby boomers who have stayed with the same business throughout their careers and therefore are eligible for pension benefits are in a good position to retire comfortably.

Assistant economics professor at Virginia Military Institute Tim Murray has observed that the majority of millennials’ funds are invested in high-risk investments.

Retirement income from a pension plan is guaranteed, but millennials must rely on market-risky investment vehicles like 401(k)s, 403(b)s, and individual retirement accounts (IRAs), he adds. To paraphrase, “knowing that if you work for a firm for 30 years, you are guaranteed a specific percentage of your salary for the rest of your life affects your investing strategy compared to millennials who have to begin saving in a hazardous asset for their whole career.”

  1. Millennials Experience Less Job Stability

The advent of the gig economy has changed the very definition of employment. On-demand services can be offered through several online marketplaces such as Uber, 99Designs, and Upwork.

Freelancing, or “gigging,” is not depending on an employer’s regular schedule like most jobs do. Instead of being considered full-time employees eligible for benefits, these workers are treated as independent contractors who are paid on a project-by-project basis.

Because gig employment doesn’t generally fall into the traditional categories used to describe the labor force, quantifying its number is challenging. MBO Partners estimates that 41 million Americans are independent contractors, freelancers, solo entrepreneurs, temporary workers, or on-call employees. In 2019, 35% of Americans, according to a separate research by Upwork and Freelancers Union.

The gig economy has both advantages and disadvantages for employees. It allows for maneuverability. Independent contractors have the freedom to set their own hours and try out new fields of expertise without worrying about becoming broke.

30-year-old Evan Waters borrowed almost $100,000 to attend Boston College. He was working for a Silicon Valley tech business and supplementing his salary by offering digital marketing services.

He claims, “There were a few years when my part-time income exceeded my full-time salary.” With diligence and some other income sources, I was able to eliminate my debt in around three to four years. Having marketable skills was a huge boon for me.

However, the gig economy hasn’t benefited everyone. Many people are concerned that workers in gig economy jobs will have to bear the financial and professional risks of their own employment and will not be provided with any perks or paid time off.

Jeremiah LaBrash, 34, works as a programmer for a telecommunications firm in Los Angeles. He thinks the instability of the gig economy makes it more difficult to save and invest for the future than it was for his parents’ generation. “Many of my acquaintances have had several career changes, as well as job changes,” he says. In addition, many of my generation-y pals make their living in the “gig economy.” They are unable to put money aside since they are uncertain about their future employment prospects.

Because of all the changes that have occurred since my parents’ and grandparents’ generations, I no longer believe that my generation will be able to achieve the same degree of financial success as theirs.

What Is the Future of Millennials?

Young adults are at a significant disadvantage as a result of macroeconomic circumstances. The path ahead of them is very rough. They are finding it harder to acquire wealth and enter the middle class due to stagnant salaries, student loan debt, decreased social mobility, and the elusiveness of property ownership. Despite the gradual recovery of the economy and the stock market since the previous recession, many millennials worry about their financial future because they believe they missed the boat.

At the age of 34, Jordanne Wells calls Cincinnati home. They manage to take care of their two young children and their aging parents with a careful mix of work and love.

Her statement that “our talks about the future stretch beyond merely college preparation and retirement” is spot on. “We also need to think about retirement funds for long-term care, or an in-home care provider, or the likelihood that I will have to stop working sooner than intended.”

Not only are millennials not alone in having to care for loved ones, but neither are the financial difficulties that come with doing so. Wells created the site Wise Money Women to help other women overcome the same financial challenges she had. It’s a scenario that “I’ve discovered that so many people, especially millennial women, are in,” she adds.

Meanwhile, the federal government of the United States owes a staggering $22 trillion. The money owed must be recovered in some fashion. The tax money contributed by retiring baby boomers will decrease significantly. They will become a drain on government coffers as they collect benefits from Medicare, Social Security, and other entitlement programs.

Voters in the United States have repeatedly shown they are not prepared to accept higher taxes or cuts to social programs. That’s like saying they want cake and to eat it too. However, the costs must be paid for, and future generations of taxpayers, particularly millennials, will bear the brunt.

However, this does not imply that millennials face an entirely bleak future. When compared to prior generations, they benefit in a few ways. You can get a wealth of information, most of it free of charge, on topics including personal finance, money management, and future investment strategies on the internet. Further, technological developments have made opening an investing account less of a hassle, and the spread of index funds has made it possible for people to achieve market returns without incurring excessive transaction expenses.

Murray thinks that millennials can get past their financial hiccups if they just get smart about it and use the tools at their disposal.

When compared to prior [generations] their age, today’s young adults have access to a wider variety of financial instruments and resources. Even while millennials have more debt and savings risk than prior generations, this does not indicate that the future is bleak. You may maximize your savings potential by starting to save as soon as possible, talking with financial consultants, and even completing finance classes. It’s best to start meeting with advisors before you hit your 40s or 50s.

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