Millennials are finally making money. Now what?

Plenty of experts have weighed in over the past two decades as to how millennials are changing the nature of family, business, and consumer habits. Much of the commentary revolved around the idea that millennials were “killing” established industries.

Most of these claims were bogus, but some of them turned out to be true — although I, for one, am not going to lose much sleep over the steady decline of golf.

Analysts now turn their attention to the next disruptive generation. As true digital natives, Generation Z has the potential to revolutionize the way we do business and interact with each other. They could also be our last best hope to protect our planet from catastrophic environmental decline.

That said, millennials and their impact on society are still on people’s barometers. And if you believe some of the most recent headlines, millennials are finally making some headway with their finances. By becoming a major influence on the economy, this generation can finally make lasting changes to society.

A Rough Start

In general, Millennials are much poorer than previous generations.

If you’ve spent any time on social media, you already know this. But this isn’t a qualitative observation. Millennials’ net worth averages about $40,000 less than Gen Xers at the same stage of life.

Not surprisingly, their emergence into adulthood during the Great Recession had a lasting impact on their financial habits. Millennials were sold the idea that you had to go to college if you wanted to be successful, but when they entered the workforce with their college degrees, they found that they couldn’t find positions in their fields. Furthermore, those positions they could find rarely paid very well.

Burdened with crippling student loan debt, they delayed traditional milestones like homeownership and starting a family because, frankly, both of those things are just too damn expensive.

But millennials are no longer the young upstarts they once were, and their frugal spending habits are starting to pay off. Studies have indicated that millennials save a higher percentage of their paychecks than older generations. They also pay the least on credit card debt than any other generation. By delaying big purchases, they’ve been able to put away enough money to start participating in the economy on a major scale.

The youngest millennials are already in their mid-to-late twenties. The oldest — myself among them — are already either well into their thirties or approaching 40. Millennials are entering leadership positions at their companies and enjoying fatter paychecks. They’re also beginning to receive an inheritance boost from their parents. An estimated $68 trillion will pass down from baby boomers to their millennial children over the next 30 years.

The big question is, what are millennials going to do with all their new-found wealth?

Home Ownership

First and foremost, millennials may start to finally feel secure enough in their finances to leave their apartments. According to Jason Dorsey, president of the Center for Generational Kinetics, “The next 10 years may finally be the decade where millennials feel a more solid financial foundation, especially after the long economic headwinds and recovery many of them have faced due to the Great Recession, wage stagnation, rising cost of real estate, and student-loan debt.”

And millennials want to own homes. A 2019 study by Chase Home Lending indicated that 52% of millennial first-time homebuyers feel financially ready to buy a home while 70% said they were prepared to cut back on spending to make it happen.

For the most part, only millennials who have a substantial amount of yearly income have been able to afford homes and mortgages up until now. According to a LendEDU study of 1,000 millennials split evenly between three income brackets, 83% of millennials making $49,999 or less each year have no mortgage debt — they are likely not homeowners.

Nonetheless, many millennials may struggle to take on a home loan — even if they have a high income — because they are already overburdened with debt. “A large salary isn’t a free pass to take on tons of debt, and compounding interest can turn a minor debt problem into an inescapable hole if it is not monitored diligently,” says LendEDU.

Millennials are also on track to pay substantially more for their first homes than older generations. According to research from Student Loan Hero cited by the Army & Navy Academy, millennials who have the resources to buy their first home pay about 40% more than individuals who bought their first home in the 1980s.

Family Life

More millennials may start families as well. The U.S. birth rate was at its lowest in 32 years in 2019, in no small part because millennials just couldn’t afford the cost of raising children.

It costs as much as $21,000 to raise a baby in its first year, so it’s not surprising that a demographic which owes a collective $467.6 billion in outstanding student loan debt wasn’t thrilled at the prospect of adding another $1,750 in monthly expenses to their already-strained budgets.

But millennials are making more money, and they have more options available than any other generation to finance new lifestyle changes. Many of the latest online lenders provide personal loans as low as $1,000, which can help new parents make important purchases and pay for emergencies. Graduates struggling with their student loan payments also have a range of financial options for refinancing. Many of the best personal loan options include low interest rates, low fees, discounts, and flexible repayment options.

With some of their student loan debt paid down, and with more money coming in, having kids may finally start to make financial sense.

It’s important to note that the U.S. fertility rate has been relatively low for decades.

But as it turns out, “Cats Not Kids” is more than just a funny thing to put on a t-shirt.

Millennials may be more likely than other generations to never have children. According to Qualtrics, 44% of millennials either don’t want to have children or haven’t decided yet. If financial concerns aren’t deterring them, it’s societal factors that are getting in the way. Many millennials believe that current conditions in the U.S. just aren’t conducive to having or raising kids. In many ways, they make having a child a very risky thing to do.

Although progress has been made, U.S. workplaces are still hostile to pregnant women and mothers, even at the biggest companies. The U.S. just doesn’t have policies that support new families who are starting their careers, either. There is no universal healthcare, no guarantee of substantial paid parental leave for both men and women, and no easy or free access to daycare services.

In the days of yesteryear, more parents had the option of staying at home to raise children. Some families can still pull this off. But for most millennial families, it just isn’t possible to keep everything afloat on a single income.

Saving for Retirement

Finally, millennials are starting to put money — real money — aside for retirement, albeit they are a bit late.

According to MarketWatch columnist Mark Hulbert in his analysis of the research study “How Will Retirement Saving Change by 2050? Prospects for the Millennial Generation,” the prospects are pretty grim.

“Compared with [millennials’] dismal retirement finance prospects, those currently in or close to retirement would seem to be living on Easy Street,” says Hulbert.

Millennials’ late start certainly took its toll. Combine that with crippling debt, widening wealth inequality, and the replacement of good-paying jobs with a “gig economy,” and “there is clearly cause for concern,” as the researchers put it. Millennials will likely need to retire later or settle for a working retirement (an oxymoron) in order to make ends meet.

There is some cause for optimism. Millennials are considered the best-educated and most diverse generation in US history. Nearly half are concerned about their ability to retire when they choose, so many are taking steps right now to secure their retirement.

Experts at Bankrate created an investing guide that provides millennials with the necessary steps they need to consider when investing, including:

Evaluating how much you can invest
Educating yourself on the stock market basics
Determining financial goals, both long and short term
Getting started in the stock market

If millennials continue to be as frugal as they have been, they’ll realize they need to prioritize making contributions to their retirement funds. More millennials are already saving for retirement than Gen X, with 45% of millennials maintaining a retirement account compared to just 36% of Gen Xers.

A Shift in Values

Although we say we aspire to build a world where wealth isn’t the sole deciding factor in one’s ability to participate in society, we’ve been moving in the wrong direction.

Theda Skocpol, the Victor S. Thomas Professor of Government and Sociology at Harvard’s Faculty of Arts and Sciences, says, “Those with higher incomes participate more [in] everything from voting to contacting politicians to donating. What is quite new in recent times is… very systematically, that government really responds much more to the privileged than to even middle-income people who vote.”

Pay-to-play politics are certainly not ideal, but with millennials acquiring more wealth and moving into more leadership positions, they may finally have the resources to fight for their own values and priorities. And without a doubt, millennials value very different things than previous generations.

Millennials are often accredited with valuing sustainability, plurality, and equality. They’re much more open to concepts like marriage equality and social justice.

Other generations have prioritized these things, but there are clear differences between the attitudes of millennials/Gen Z and previous generations toward specific issues, such as ethnic diversity and the role of government. According to Pew Research Center, millennials and Gen Z celebrate diversity much more than previous generations, and they believe the government should play a significant role in solving societal problems:

Deloitte also notes that millennials are more skeptical of businesses than other generations. Instead of viewing business and industry as pillars of virtue, they believe most companies only work for their own agendas and not for the betterment of society.

However, Deloitte also says, “Younger generations are putting their money where their mouths are when it comes to supporting businesses that make a positive impact on society. Many say they will not hesitate to lessen or end a consumer relationship when they disagree with a company’s business practices, values or political leanings.”

Money is certainly influential. With more of it in their hands, the younger generations have the potential to change the way the world does business forever.

The Millennial Power Play

Millennials won’t be the most talked-about generation for much longer. Generation Z is bound to reveal their own unique sets of traits and values as they enter adulthood. However, it’s clear that the two youngest generations are more alike than they are different.

As millennials grow into their wealth and take power, it will be interesting to see what changes they make for future generations.

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