6/28/2012 7:36 PM ET|
Are millennials saving the economy?
For them, the latest technology is a need, not a want. They deny themselves little and plan to save money later. Can they spend us into prosperity?
John T. Rogers, age 26, grew up in rural West Texas, raised by a single mother who often worked three jobs to make ends meet. He says his 59-year-old mother remains fiscally conservative, refusing to spend much on herself, though she now earns a respectable income.
But when it comes to spending, Rogers is not following in her footsteps. "Not to knock J.C. Penney's, but I definitely wanted to step up my style," he said. Earning $46,000 a year as a communications manager for a private, nonprofit university in Denver hasn't held him back. He bought a hybrid Lexus SUV after graduating from college and recently purchased a $950 Hugo Boss suit as well as an iPad 3, since the MacBook he purchased five years ago "moves at a glacial pace and I can't carry it around to meetings and look cool."
To balance his spending, Rogers skimps in other areas, shunning trips to Starbucks and seeking out free or inexpensive cultural activities. Still, he's racked up $3,500 in credit card debt and owes $19,000 in undergraduate loans and $22,000 in graduate loans that will kick in this September.
Rogers is like many of his millennial peers, who are helping to jump-start the economy in ways that their more fiscally conservative boomer parents are not. Despite the fact that those ages 18 to 29 have a high unemployment rate, at 12.4%, and those with college degrees are the most indebted graduates in history, millennials are positive about the economy and their futures. According to the February 2012 report by the Pew Research Center "Young, Underemployed and Optimistic" 88% of those ages 18 to 34 say they either earn enough money now or expect they will in the future.
This has led to some relatively uninhibited spending by young people. According to a study by PricewaterhouseCoopers, Gen Y shoppers will be a big factor in leading the economic recovery, since this generation has a greater willingness to spend, especially on new technologies. "Gen Y is accustomed to instant gratification and demands the latest and greatest gadgetry; a tech lifestyle is a need, not a want," the report says. Millennials are more inclined toward spending on discretionary items, because they have fewer financial responsibilities and less need than older shoppers to accumulate wealth in the short term, the report says.
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Jason Dorsey, chief strategy officer at The Center for Generational Kinetics in Austin, Texas, says that while there's certainly a significant group of young people who are struggling financially, there are also plenty of affluent young professionals. And they often spend without considering the long-term implications.
One big reason? Spending is easier with credit cards. "Nobody our age carries that much cash anymore," says Chris Sands, 27, of oXYGen Financial, a financial planning firm tailored to Generations X and Y. The preoccupation with material goods is a reflection of the consumer-driven culture in which they were raised, says Matthew Segal, 26, co-founder and president of Our Time, an advocacy group for young Americans. "We've been deluged by ad and marketing campaigns from the crib," in a way that no prior generation has experienced, he said. And the rise of social media means that there are many more platforms to market to this group.
Studies show that young people are more focused on material goods than prior generations were at the same age. The Monitoring the Future study, an annual survey of high school seniors, found that only 30% of baby boomers surveyed from 1976 to 1978 felt that having a new car every two to three years was important, while 44% of millennials surveyed between 2000 and 2010 valued that as important. In an American Freshman survey of entering college students, 42% of boomers surveyed in 1966 said that being very well off financially was important -- while that number rose to 80% of millennials surveyed in 2011, a record high.
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Make no mistake, it will be the Millennials who lead the recovery, but it will be the ones who learned the lessons of the recession and managed their finances responsibly who did it, not the ones who fed their never-ending need to consume by racking up a mountain of debt.
I am 27 and don't agree with this excessive spending. You'll look back in ten years and wonder, "where did all my money go?" Spending money you don't have leads to bills you can't pay. When you start defaulting on loans because you bought a Lexus rather than a Honda that will hurt the banks and the economy. If an entire generation is doing it we will be in big trouble. Those things you have to save for if you just have to have them. I think the SUV purchase bothers me the most because it is going to depreciate in value. At a higher income level you may not have to worry about that, but $46k really. I'm not saying you can't have anything, but you need to be smarter with your purchases. If you are one of those people who is going to upgrade your car in a year or two you are going to take a big hit on that Lexus. I don't think they should be praising anyone for buying a Lexus making $46,000 a year, or using credit cards to purchase toys. It's a similar situation where people where taking loans to invest in the stock market it will not end well for anyone.
This is such old tripe. I have heard this arguement for each generation coming out into the world. Whether the economy is good or bad, young professionals come out and spend their money on looking 'good'/'cool'/'professional'. And then some dumb article either praises or damns the generation for being careless or leading a recovrery. It is a normal stage there is nothing different about this generaion and any other. Please don't somehow try to attribut praise to a normal demographic occurrence. In 10 years that same young man will be working out of debt, buying a home and starting a family. Will we praise him for leading the recovery? I doubt it, it will be the next generation that is buying high end goods and services that will be leading the economu.
I am 25 years old, married, have owned my home for 2+ years, max out my Roth IRA, contribute to my 401K, have an emergency fund and additional savings and have no consumer debt, all while making $40k per year. My wife and I drive 7 and 9 year old, paid off cars. I do not have a smartphone or own an ipad. I do have student loan debt that I am aggressively paying down. There are some of us out there who have observed and learned A LOT from the Great Recession. Hopefully the responsibile ones will be able to lead by example and influence our peers.
Clueless, seriously in debt, and purchasing more gadgets (with short obsolescence horizons) on credit.
Not producing any tangible wealth.
This generation can't save a dime, they will not save us.
lets see $50,000 grand in debt and $46,000 a year, lexus car payment, expensive clothes = filing for bankruptcy sooner rather than later...
boy this generation has really got it together....NOT!!
Yes: I am fond of Amos the Prophet. And I'm neither Jew nor Xtian.
This isn't an 'ignorant stereotype'... It's the truth. While I myself (at 22) know many people who are saving enough and not jumping at every opportunity to spend , I also know those who buy everything new that comes their way.
That being said. I graduated college a year ago - got myself a job, not the BEST job, but one that pays the bills. I pay for living expenses + tv + internet + cell phone. I bought a GMC SUV last October on which I make monthly payments(and insurance). I have student loans out the a**, yet I make those payments every month. I just purchased an iPad 3 a couple months ago. All this AND I save money in the bank and a 401K.
This article's main point (what I got from it) is that we spend more than our parents did at our age and I agree - I most certainly do. I know I'm doing something to boost the economy (like buying a car) the only fault I see is in ourselves, not the article, and it's that our generation as a whole (meaning not everyone but the MAJORITY of us) purely and simply do not save enough money for the future
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