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By Steve Dinnen
Over the past couple of years, nearly everyone has felt the squeeze of inflation in one way or another. But millennials have felt a stronger squeeze than other generations, according to recent research.
For starters, millennials, now in the their mid-20s to mid-40s, have felt the pinch of rising costs for child care. The Economic Policy Institute notes that Iowa parents annually spend an average of $10,378 on child care for each child. (In the 1960s, my stay-at-home mother paid exactly nothing).
Many millennials are also still paying back college loans, a decade or more after graduation.
Besides that, social media has had a profound impact on millennial spending habits. Observers say sites like Facebook and Instagram have fueled discontent and a desire to keep up with the Joneses. Your home may not be for sale, but websites like Zillow assign a value to it that can be seen by all your friends, and mimicked by them with a new mortgage that costs far more than it would have just two or three years ago.
“They take on debt because they don’t want to miss out on life’s events,” said Emily Irwin, managing director of advice and planning at Wells Fargo. “They think, ‘How do I take what I’m making and fund the lifestyle I want to live?’”
According to a recent Wells Fargo survey on spending habits among those born between 1981 and 1996:
- More than half of affluent millennials (who have at least $250,000 in investible assets) say they’ve been greatly affected by the cost-of-living crisis. Gen X, baby boomers and silents all report lower pain points here.
- Three in five say it’s important to “look or appear” to be finally successful to others. This influences the way they dress, the homes they buy and the cars they drive.
- A third say they sometimes lie about or exaggerate their income or savings or spending in order to maintain an appearance of financial success.
- Forty percent have taken on more debt than they want in order to live larger.
But there’s hope. Inflation is cooling. Millennial parents will soon cast off child care expenses when they’re kids are a little older (and start marching toward a fresh batch of college expenses).
The net worth for someone over 35 is five times greater than someone under 35, so many millennials will be more equipped to power through financial distress. And they’re using those social media skills to track down advice on spending versus saving, needs versus wants and household budgeting.
As Irwin put it, “I’m confident they’ll be able to figure it out.”
