Young Americans still scarred by financial crisis

A report finds that millennials are the most fiscally conservative generation since the Great Depression.

By TheStreet.com Staff Feb 5, 2014 2:40PM

Credit: © Tom Merton/OJO+/Getty Images
Caption: Two businesspeople in an office with a laptopBy Jason Notte, TheStreet TheStreet.com logo


They've watched a generation before them build a fortune in a tech boom and lose it all. They've watched their parents deal with a housing crisis that dwindled their home equity to nothing.


They went to college and emerged with huge debts and no high-paying jobs to help work it off.


Can you blame millennials for being careful with their money? Last month, UBS Wealth Management Americas released its quarterly Investor Watch report, which labeled millennials (which it defines as people ages 21-36) as the most fiscally conservative generation since the Great Depression.


That's right, they're as frugal as folks who made a point of saving scraps of aluminum foil because they remembered not having any. The majority of millennials surveyed said that the best advice they ever got was to save money, a switch from every other generation that cherished investment advice above all other financial tips.


As a result, millennials aren't buying into the purported merits of long-term investment and market chasing. Only 12 percent would invest some unexpected extra income in the market, while only 28 percent see long-term investment as key to success. They want to achieve their goals, not hit a specific number.


"Millennials seem to be permanently scarred by the 2008 financial crisis," Emily Pachuta, head of investor insights at UBS Wealth Management Americas, said in a statement. "They have a Depression-era mindset largely because they experienced market volatility and job security issues very early in their careers, or watched their parents experience them, and it has had a significant impact on their attitudes and behaviors."


Of course it has. As of last year, nearly 300,000 U.S. workers with college degrees were earning minimum wage. Even when the U.S. economy recovered, 5.7 million of the 8.7 million jobs shed during the recession, or roughly 65 percent of those regained jobs, were of the low-wage variety, according the National Employment Law Project. That's compared with the 60 percent of all jobs lost during the recession that paid middle-income wages or better.


The Center For College Affordability and Productivity reported that nearly half of the college graduates from the class of 2010 are working in jobs that don't require a bachelor's degree. A full 38 percent have taken gigs that don't even require a high school education. According to The Associated Press, that has dropped the median wage for college graduates significantly since 2000.


It's why the large group of millennials that considers itself either conservative or somewhat conservative (34 percent) has 52 percent of its average portfolio dedicating to cash, compared with 23 percent cash for other investors.


Basically, they don't want to get blindsided as badly as Generation X was in the last recession. The Pew Charitable Trusts says the leading edge of Generation X -- folks born from 1966 to 1975 -- lost about 45 percent of its wealth during the Great Recession. What little net worth it had plummeted from an average of $75,000 in 2007 to just $42,000 in 2010 and was further depressed by the fact that Gen X missed out on the dot-com and housing booms.


Meanwhile, according to a 2012 Insured Retirement Institute report, only a third of Gen Xers are "very confident" about having enough money to live comfortably during retirement. Professor Glenn Crellin of the Runstad Center for Real Estate Studies at the University of Washington notes that, on the whole, less than 60 percent of Gen X owns a home -- well below the 70 percent to 80 percent rates of the three preceding generations.


By sheltering themselves from similar risk, millennials are feeling more confident about their own futures. Their parents, however, don't seem so sure. While the majority of millennials (57 percent) believe that they already have achieved financial stability, or will in the future, only 18 percent of baby boomers feel their kids will have as much financial responsibility as they have.


In fact, 59 percent of baby boomers feel that their adult children need more help to succeed than they did at their age and provide financial (32 percent) and emotional (63 percent) support. The millennials think it's their parents who are going to need hand-holding as the years progress.


After watching their parents' retirement and investing plans scrubbed by the recession, concerns about parents rank near the top of millennials' personal financial concerns. Seeing themselves as the unfortunate filling of a sandwich generation that has to care for both its children and parents, Millennials are more concerned about their parents' financial situations (21 percent) than either Gen X (15 percent) or the boomers (4 percent) were.


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16Comments
Feb 5, 2014 3:26PM
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Too bad our Government in Washington D.C. doesn't abide by the Millennials' ideals!!!
Feb 5, 2014 4:56PM
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I'm a tail-end baby-boomer....sandwiched...so i see everything clearly. Here's what I know. Compared to baby-boomers the millennials....do not have as many job opportunities available nor have the salaries kept up with inflation. This makes it incredibly difficult to get into a house and pay off a mortgage, raise kids....and THEN TRY to save and invest money after that.

 

College cost and books in 1981-85, were just as costly, my government student loans were at 7.25% and I felt lucky with those exceptionally low rates. The costs of college and housing is all relative. I drool over people getting a 4.5% housing loan....mine was 8.25% in 1989 which again was exceptional at the time.

 

No easier time in history to purchase a home...if your salary is high enough....there inlies the millennials problem....no decent jobs....engineering or manufacturing anymore. So who need the low interest rates...can't borrow if you don't have a job or can't earn enough.

 

For advice, from your friendly silent millionaire neighbor....do this: buy 1/2 the house you can afford, drive good working cash cars, save 15% in your 401k, buy farmland and buy silver....did you hear that?....hard assets...if you don't know what they are...better figure out...they have printing presses running and who wants to work past 55....better to work on your own projects. Don't trust the people making the currency....real money is gold and silver...and land, limitied natural resources.

Feb 5, 2014 7:36PM
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I would point out that the majority of Baby Boomers lived through a virtual continuous recession from 1970 through 1982.  I left college with a masters in Chemistry in 1975 because chemists who went directly from B.S.'s to Ph.D.'s were writing to colleges asking for masters degrees because no one was hiring Ph.D.'s.

It took me until January, 1977 to get a good job.  Meanwhile inflation raged and destroyed the buying value of the pensions many retirees had back then.  Interest rates on mortgages were well over 10%.  In fact, by 1991 they were still over 9%.

Feb 5, 2014 4:13PM
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I don't know where the come up with some of this ?? And don't have time to waste reading article.


But our parents and ourselves were pretty Fiscal Conservatives, for our day...

Our Grandparents lived through the Depression and our Parents were born a slight bit ahead of it.

And they were able to identify with many of the problems, but not all.

Because some children were shielded from the effects of it and others may have been because of stature or where they lived...


Not sure a lot of youngsters today, (majority wise) have the money or jobs we did...?

Can't spend it or save it, if you don't really have it.

Feb 5, 2014 3:03PM
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Obamanomics should scare the hell out of them...   The debt Obama has piled on them will take them most of their working lives pay off.   They elected the socialist monster.   The problem is now theirs.

When the young generation figures out what the democrats have done to them, they are finished...
Feb 5, 2014 3:59PM
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Good. Maybe they will make less mistakes in the future.
Feb 5, 2014 4:02PM
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"As a result, millennials aren't buying into the purported merits of long-term investment and market chasing. Only 12 percent would invest some unexpected extra income in the market, while only 28 percent see long-term investment as key to success. They want to achieve their goals, not hit a specific number"

That is sad, and a case of biting off your nose to spite your face.
Feb 5, 2014 6:21PM
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Scarred is working for a lifetime and having Obama steal most of it.
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If I were a millennial I'd be more worried about Obama's policies which have resulted in sluggish job growth and a lack luster economy.
Feb 5, 2014 5:36PM
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Being a millenial as it is defined in this article and having the opportunity to be around other millenials, I would say this is generally false.  Most of these people are just getting started in their careers and are able to make due by simply focusing on themselves and their needs.  But as they get into their 30's and try to settle into the family life with the responsibility of wife and children, things become more difficult and most of them fail because they know nothing about sacrifice, teamwork and being a part of something that is bigger than yourself.  I partially blame the millenials for not developing sufficient life skills that enable them to support their family, but more of the blame must go elsewhere (specifically government and employers).  In the last 25 years, wages have not increased enough to support the increases in cost of living.  As items like cell phones and home internet access have become a requirement for many career positions in this country, wages were never adjusted accordingly to account for this.  Also, bachelor degrees are quickly becoming the equivalent of what a high school diploma was a few decades ago.  Masters degrees and high level certifications are almost a necessity if you want to make it out of entry-level positions.  A 6 figure household income meant wealth and affluence pretty much anywhere not long ago, but today in major metro areas $100k for a family of 5 is bordering on poverty.  Corporate balance sheet have record levels of cash but employees at their annual evaluations are told that the pay freeze is still in effect or we can only adjust 3% for inflation.  It doesn't cut it.  Government and businesses have to make changes to correct the injustices that are going on in the system.  If not, 25 years down the road, America will be a very very sad place.  Some millenials are doing what they have to do in being fiscally conservative, but it is mostly due to the fact they don't have a dime to spare.  And when most millenials do have a few extra bucks, they aren't setting up emergency funds or investing in blue chip stocks.  They are blowing it on trips and clothes.  I've seen it from friends, colleagues and others.  This country is becoming more sad and depressing by the day.
Feb 5, 2014 6:25PM
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I think I disagree with the age brackets for Gen X'ers VS millenials.  I think Gen X extends beyond 1975.

 

I am 34 (born in 80), and definately consider myself and my peers Gen X'ers.  We didn't grow up with the internet or cell phones, etc.  We all finished college and had job opportunities.  There is a big difference in life outlook between 34 year olds and say a 26 year old.

 

Feb 6, 2014 12:34AM
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Why shouldn't millenials be shaken by the recession? Everything they were told while growing up has turned out to be bullshiz. Go to college. Get a good paying job. Work hard. Buy a house and start a family. Live a good honest life. Retire and then die. Sounds simple.

 

That degree doesn't quite cut it any more. A good paying job today, could be a minimum wage job tomorrow. Why work hard when you can get by on ash kissing. Better yet dissability and welfare require little to no work. Everyone is loosing their homes so why bother with owning one. Have you seen the divorse rate? Who really wins in a divorse? Honesty will get you no where. Look at Politicians and Corporate America. While you may be able to recite a list of people you know who retired, there is a good chance millenials know just as many that are working in their retirement. Die? who can afford to?

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