A quick Google search shows that millennials are often characterized as entitled people who are quick to complain about their financial struggles – but that’s not a fair assessment.
There is a reason why millennials – usually defined as those between the ages of 28 and 43 – are on shakier financial ground compared to previous generations.
The latest data from Allianz highlights the difference between millennials and boomers from an economic point of view.
This shows that, while boomers may have benefited from periods of strong economic growth, millennials have experienced one financial crisis since their lifetime. finally able to start saving and increase wealth.
According to a study from the American Journal of Sociology, the average millennial has 30% less wealth at age 35 than boomers at the same age.
This is how the “biggest loser” society can move forward after so many setbacks.
Millennials have a number of economic factors at their disposal over the years.
During the Great Recession, which lasted from 2007 to 2009, millennials — many of whom were in their 20s at the time — were affected by high unemployment rates, making it harder not only to build a career, but to put aside savings and keep up with student loan payments.
With student debt, millennials aren’t helped by the fact that tuition costs increase exponentially in the years before graduate school.
The Education Data Initiative reports that the average annual cost of a public four-year institution was $514 in 1973-1974, when many boomers attended.
However, in the 2003-2004 academic year, when many millennials participated, that cost rose to $4,587. This leaves millennials with high student debt, a struggling economy, and a slow economic recovery that will ultimately take years.
In October 2009, the national unemployment rate reached 10%, according to the Bureau of Labor Statistics.
Three years later, however, it is still at 7.8%. In contrast, boomers who entered the workforce in January 1970 enjoyed an unemployment rate of just 3.9%, according to the Federal Reserve.
After the Great Recession, millennials found themselves trapped in an environment of low interest rates.
Not only did the Federal Reserve’s benchmark interest rate fall to record lows during the crisis, but it remained stagnant for more than five years afterward, making it harder for millennials to grow their savings.
Interest rates were more favorable for savings during the 1970s, allowing boomers to build cash reserves, data from the Federal Reserve show.
Although the pandemic has affected people of all ages, millennials have been slow to pay off debt and move on with their careers while experiencing high unemployment and inflation.
Read more: The cost of living in America is still out of control – use these 3 ‘real assets’ to protect your wealth now, no matter what the US Fed does or says.
It’s not all doom and gloom for millennials. The good news is that, at this time, they will be more advanced in their careers, giving them the opportunity to increase their income and savings.
Even today’s oldest millennials have 20-25 years left in the workforce, giving them the opportunity to increase their IRA or 401(k) contributions and invest their money in order to accumulate a solid nest egg in retirement.
Personal finance celebrity Suze Orman says there is an easy way for the younger generation to increase their wealth.
“The priority is the youth, the priority is time,” Orman told Moneywise last year. “If there’s anything the younger generation needs to know, it’s that the key ingredient in the recipe for financial freedom is compounding.”
For example, if you start saving $100 a month at age 35 — with a 12% average annual rate of return — you’ll have $300,000 by age 65, Orman explains.
While this is far from the estimated $1.46 million Americans need to save in order to retire comfortably, according to Northwestern Mutual, that’s still a lot of money that could help millennials make up for lost time during the financial crisis.
Another way American millennials can make up for lost time is through real estate. This powerful tool can be used if you own a home or choose to invest in real estate investment trusts (REITs).
The latter is a popular investment tool that is an alternative to buying real estate outright. It is beginner friendly as it is possible to invest in REITs with small amount of money.
When millennials experience a tough economy, their situation is hopeless. If the economic situation can be turned around, they have a prime opportunity to make the most of the next decades in the workforce.
This article provides information only and should not be considered advice. This is provided without warranty of any kind.
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