McCoy & Hiestand Attorneys at Law

By Leah F. Walsh

An online article earlier this year claimed that millennials spend more on their daily coffee than they spend on investing in their retirement. It’s hardly surprising that this claim quickly spread like wildfire throughout the Internet community. It seems that millennials have captured the attention of everyone these days—from investors to employers—and it’s easy to understand why. Their generation forms the largest generation in U.S. history and, as such, these 90-plus million young adults are increasingly becoming the driving force in our economy. But as this fledgling population enters their prime spending years, we should take a step back and ask ourselves not just what are they spending their money on, but why? Because whether you are looking to fill a job at work or simply better understand your millennial child, what recent research shows about them just might surprise you.

Who are Millennials?
While there is some disagreement on the precise definition, the general consensus is that the millennial generation—also known as “Generation Y”—consists of those people born between 1980 and 2000. Chances are therefore high that you regularly deal with at least a few of these people as the definition encompasses anyone currently in their late teens, 20s, and even up to their mid-30s by 2017. When they were born, however, is just the tip of the iceberg in terms of what defines this dynamic group of young adults who came of age in a world surrounded by rapidly growing technology. Further, though they were once broadly condemned by the masses as being self-entitled and spoiled, these tech-savvy individuals are now proving to be even more resourceful in early adulthood than some might have expected.

How Millennials are Adapting as they ‘Grow Up’
In stark contrast to their childhood years—in which millennials were generally perceived to have every advantage over prior generations—the millennial was thrust into young adulthood with a number of obstacles standing in their way. Most notably, the majority of them entered the U.S. workforce during our country’s greatest economic downturn since the Great Depression and therefore had an immediate disadvantage in terms of finding meaningful employment. Further, despite being the most educated generation in history, most millennials came out of college facing an oversaturated job market, shockingly high student loan debt, and the forced reality of accepting a low-paying, entry level job—not exactly the easy transition into the “real world” that they may have been expecting!

As a result of these harsh economic circumstances, millennials have been forced to adapt by delaying many of the traditional financial milestones their parents had achieved by their age. With respect to buying a home, for example, the most common living arrangement among the millennial generation—for the first time in modern history—is living at home with their parents, as they simply can’t afford the rising costs and tightened lending restrictions associated with home ownership. Many millennials are also delaying the process of buying their own vehicle, opting instead to rely upon public transportation or vehicle sharing options.

But if they aren’t spending their money on housing and vehicles, then what are they spending their money on? According to the study mentioned above—which was released by a company that is working on an investment app for young generations—what they aren’t allocating money toward is their retirement. Considering the economic hand they have been dealt, maybe this isn’t as easy to explain as simply saying they have irresponsible spending habits. Maybe they deserve a more balanced explanation.

As a result of being forced to accept the reality of high student loan debt and relatively low wages, millennials seem to have adopted a financial strategy best summarized as “survive in the moment.” Further, they have emerged into adulthood with a sense of distrust in traditional investment models and financial planning options, having grown up with corporate scandals like Enron and the stock market and mortgage industry crash of 2008. Perhaps it’s understandable then that they aren’t investing in their retirement or 401(k) accounts at the same rate as their parents.

Instead, millennials are choosing to spend their limited disposable income on what really matters to them; their experiences. Whether it’s saving up their pennies to travel abroad to an exotic destination or simply having a cup of coffee with friends, they are making the most out of their entry level wages. And despite the fact that they may be willing to spend too much on their daily caffeine fix from their local coffee shop, the financial strategy of this generation may not be all that bad. In fact, many of the same surveys which report the low retirement savings also show that millennials are also less reliant on credit card debt and more likely to live within their means than prior generations were at their age. At least that’s saying something positive about their attitude towards fiscal responsibility!

What Does This Mean Going Forward?
So while millennials may have a long way to go in terms of learning how to manage their money and invest in their future, the bottom line is they are doing the best with what they have and it isn’t all that bad given the hand they have been dealt. And though it’s too early to tell whether they will be able to pull it together and survive in retirement, their unique adaptability in this unpredictable economy may prove to be one of their greatest advantages yet. So for now, let’s try and give them the benefit of the doubt because, whether we like it or not, they are our future.

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MCCOY, HIESTAND & SMITH, PLC
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