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Thursday, October 17, 2013

Generation Y is in huge debt and isn't saving

By Tom Enton

Today's teens and twentysomethings, termed “Generation Y,” have become known for coddled upbringings, strong opinions, self-expression and free spending habits. Combined with a difficult economy—in part produced by the get-it-now, pay-for-it-later mentality across the country—Generation Y is experiencing steep financial difficulties including high debt and low savings. 

Even before the recession, Generation Y was setting itself up for challenges with overwhelming student loans and massive credit card debts. But now, with high job insecurity, stagnant wages and a decline in employer benefits, not to mention contending with increasing costs of education and a rising consumer price index, the economic security of an entire generation is in real trouble. It is the first generation in a century that may end up worse off, financially, than their parents. 

Well-educated and underemployed 

College Student Debt at OWS 10/9/2011
Generation Y have a high rater of college education than previous generations

While Generation Y has gained a reputation for being rabid consumers and easy spenders, much of this situation was foisted upon them. Generation Y has a higher rate of college educated individuals than any previous generation. This loosely bound group of Americans born between 1980 and 2000, also called the Millenial Generation, is witness to some challenging statistics. Millenials are graduating college with an average of $23,200 in student loans, a 24% increase from 2004. 

Nearly 37% of 18-29 year-olds have been either out of work or unemployed during the recession, a figure unmatched in the last three decades. Additionally, only 61% of these Millenials claim to have some form of health coverage. These difficulties, along with rampant spending and rising costs, have led to only about 58% of Millenials able to pay their bills on time and 70% unable to save any of their income. 

The promises of a college education have not matched with the reality of the outside world, but that hasn’t stopped many members of Generation Y from spending and living as though they have the bank account and financial freedom of someone making significantly more than them. Millenials need to understand that even if things appear to be on the right track, you can get derailed at any point. 

Turning it around 

In the past, financial turmoil has been resolved through employment and earnings. The difficulty for Millenials, however, is a fickleness towards the job hunt. Past career advice suggested moving around to different jobs to get experience, but with fewer job opportunities, this behavior can become a kind of self-sabotage. Many recent college grads are now happy just to have a job and will settle for significantly less money.

But, Millenials are starting to be more realistic. The number of young professionals that self-report watching their spending very carefully has risen by 12% since 2006. Many report a renewed, concentrated effort to get their bills and debt under control. In March, the rate of unemployment was still 18.8% for workers under the age of 25. 

Coupled with high debt, it may take more than temporary frugality for Millenials to secure themselves financially. The truth is, it may take a return to the values of the past to ensure financial stability. This includes staying put, living within your means and resisting unnecessary purchases as a lifestyle. But, as one generation supports the retirement of the previous, let's keep our fingers crossed that the numbers start to go the Millenials' way. 

About the author: Tom Enton is a law student from Nevada. He hopes to one day become a bankruptcy attorney and work for Deluca and Associates. Tom currently lives in Las Vegas.

* Image license: hardtopeel, CC BY-SA 2.0