While Generation X and Y are growing a little older, the economy continues to be driven by their parents and grandparents. However, there’s a new player on the personal finance scene and that’s the Millennials. But are they really doing things differently? Or is this youngest generation spending their money with the same abandon that sent the United States into a tail spin in the last decade?
Credit Card Debt is Going Up
With the improved job situation, Americans are spending more cash, as they have more confidence in their bank accounts. However, it doesn’t matter which generation you identify with in this category as everybody is adding to the balance carried from one month to the next. As of the first quarter of 2016, the average household had just a tick over $16,000 in credit card debt, and not one group was excluded from the spending spree.
Savings Are Holding Steady
While we scrambled to put personal savings accounts and retirement funds back in order after the collapse of 2008, the effort is leveling off. Americans of all ages are doing a better job of putting away some funds for a rainy day, but the enthusiasm is wearing off. Most households have just over $5,000 put aside in their emergency fund, barely enough to pay for a major car repair.
SUV and Hybrid Sales Increase
With higher and more stable incomes, the first thing we want to spend the extra cash on is transportation. The USA continues to fuel its love affair with automobiles. While gas prices remain around $2.00/gal. the impulse to drive a roomy SUV is just too much to resist, especially for the baby boomers and their children. However, just as the pricey family mobiles are selling, so too are the sub-compact and Hybrid segments. Millennials cite ecological concerns higher than the cost of fuel when purchasing a car.
Millennials Are Investing in Real Estate
The housing market continues to recover. However with interest rates on the rise, home sales may fall this year. However, who is buying a house has changed. 35% of people seeking to buy a home belong to the youngest generation, between 18-35 years of age. The Boomers are opting for renting like no time before, preferring to stake their investments in mutual funds and bonds, securing their cash for retirement.
And They Are Saving for Retirement
With continued discussion of the stability of Social Security returning to the headlines on a regular basis, the segment of the population buying houses are also squirreling away their retirement funds faster than any other group. Most of those just leaving college and entering the professional workforce don’t believe that they will have a pension or support from the government when they reach their golden years. They also watched their parents and grandparents struggle through uncertain turns in the economy, and in many cases, lose their life savings in the process. As such, if you are under the age of 40, you are probably in much better financial straights than your seniors.
Overall, it doesn’t appear that the up and comers are doing much that differently from the establishment in regards to increasing debt and the choice to invest in the American dream. However, when Millennials reach the age of retirement they are more likely to have secured their own comfort, rather than relying on the government to pay for their condo in a senior suburb.