The Impoverished Millennials

For years, Americans have always been fervently optimistic about the financial course of their families.  Parents and grandparents were confident that the generations to come would be wealthier and better educated than they were — and for much of American history their optimism was justified by the reality.

Is that true any longer, with the so-called Millennial Generations, which consists of adults under age 35?  A troubling article in the Wall Street Journal indicates that there are disturbing signs that the Millennials are instead on track for lives of financial difficulty.

The article looks at the savings rates of Americans by generation through an analysis of consumer finances and financial accounts.  It finds that, after a brief blip of increased savings during the Great Recession, Millennials now aren’t saving much of anything.  In fact, their generational savings rate is a negative 2% — which means many of them are burning through the savings they accumulated previously, or spending their inheritances.  They are less likely to have any investments or investment accounts, which means they have no cushion to fall back on if they lose their jobs or hit another financial bump in the road.

In short, forget about saving to make a down payment on a house — these young people are hanging on by their fingernails, hoping to make their credit card and student loan payments, and eating into their seed corn savings in order to do so.

Some of this predicament clearly is the product of bad planning and poor personal financial management.  If you’re barely making your credit card payments, maybe you should skip that expensive “destination” bachelorette party with your college pals.  But some of it is larger forces — like a weak job market, student loan debt that is far greater than that carried by prior generations, and flat wage and salary growth.  The fear is that the Millennials will become trapped and never be able to break out of a cycle of debt that leaves them living hand to mouth for most of their adult lives and limits their abilities to buy homes, start families, and ultimately to retire.

It’s not a pretty picture, and we can only begin to perceive what the ripple effects of an impoverished Millennial generation might be for our country and its economy.  Perhaps we should stop worrying so much about senior citizens and start thinking about how to create more opportunities for the younger people who must carry the country forward.