Millennials and their spending habits have been targeted as one of the reasons behind reduced demand from homes, cars and retail sales. New research, however, from the Federal Reserve points to the reason behind those spending habits as the simple fact that they spend less because they have less money to spend. In many respects that comes as no surprise given the magnitude of debt levels between the levels of student loan and credit card debt they are juggling, but that has also impacted their level of savings with more Millennials having nothing saved.
While it may come as a surprise to some, the above revelation that a growing percentage of Millennials are living lives that are in tune with our Middle-class Squeeze investing theme.
In recent years, slow home construction, declining new-car sales and the poor performance of brick-and-mortar retailers have all been blamed on the “unique tastes and preferences” of those born between 1981 and 1997. That means millennials have been accused of killing everything from canned tuna to the suburbs.
Actually, though, millennial habits are not so different from that of previous generations, “once the effects of age, income, and a wide range of demographic characteristics are taken into account,” according to a new paper by the Federal Reserve.
Younger people are spending less because they have less money to spend, the Fed concludes.
“Millennials are less well off than members of earlier generations when they were young, with lower earnings, fewer assets, and less wealth,” write authors Christopher Kurz, Geng Li and Daniel J. Vine.”
For family income,” they write, controlling for age and work status, “Generation X and baby boomer households have a family income that is 11 percent and 14 percent higher, respectively, than that of demographically comparable millennial households.”
That jibes with recent research showing that the median millennial only has $2,430 in savings and that a growing percentage of millennials have absolutely nothing saved. In fact, that generation is still largely relying on Mom and Dad for help: Most American adults between the ages 21 to 37 receive financial assistance from their parents or guardians, according to a report from Country Financial.