As a member of the millennial cohort, roughly, those born between 1980 and 1995, I have heard plenty of opinions from previous generations about how life should work and what millennials should collectively be doing as a generation. The world is not as it once was, so many of the social constructs that benefitted previous generations no longer apply. My aim is to illuminate some of the largest forces that have impacted and shaped our lives, and to bring the generations closer to one another by fostering understanding.

Technology & Productivity -

Millennials are known as the first generation to be born as digital natives, those with access to technology their entire lives. On the surface it would seem that synchrony in our work and personal lives would be substantially easier. That isn’t quite the case and I would challenge you to think about the opportunities you had as an 18 – 22-year-old entering the workforce. Technology has widely eliminated jobs and massively increased productivity requirements – this is what I like to call the economic lunchbox.  

Technology -

  • Technology has been “eating” away at opportunities from one side by eliminating large segments of entire industries, with a particular focus on formerly living wage and low-skill jobs—think manufacturing and service sectors.
    • As a resident of Ohio, and formerly, Michigan, the rust belt nickname these states have earned is evident when I see rows of empty factories.
  • As contributors in today’s workforce, workers are forced to continuously adapt as technology and artificial intelligence’s growth outpaces most other sectors, further speeding up the continual elimination of available jobs.

Employers -

  • Employers are the other side of the lunchbox closing in on us. The past two decades have posted record after record for increases in productivity, GDP growth, and corporate profits; however, wages and benefits available to those working have been nearly stagnant.
    • An undergraduate degree, if not a master’s degree, is now a prerequisite for application in most industries, let alone actually landing the job. If previous generations were able to acquire similar positions 20 years ago without degrees, why are they necessary now?
    • Effectively, millennials are forced to delay entering the workforce by going to college, and likely take on student loan debt, to work in jobs that may not even require knowledge provided by a college degree.
    • This is a great equation for educational institutions and employers, but a difficult situation for Millennials. Our generation continues to be bifurcated into the college educated and everyone else, with substantially different opportunities available to both “classes” of workers.

Education –

Millennials who desire to earn a living wage are nearly universally mandated to attend college, regardless of whether they will benefit from attending. Educational mandates are a societal construct that have been developed, nurtured, and engrained in our lives by parents, educators, and employers; however, many people accept the assertion without stepping back to survey the costs and benefits. Before jumping into a few bullet points on education, I want to share the story of a recent conversation with a client –

George, not his actual name, is a recently retired attorney (age 70) that worked his way through undergrad and law school. He graduated debt-free based on his aggregate education costing…$250,000? Nope, $10,000. Let that sink in for a minute. George was able to graduate from The Ohio State University then obtain three additional years of education for $10,000 total.

Let’s look at the costs of education today:

  • Education costs have grown by 497% over the past 35 years, more than doubling core inflation. The total cost of a public university undergraduate degree was ~$22,000 in 1985 relative to ~$110,000 in 2017.
  • Many assert that the rise in educational costs are remediated by additional lifetime earning potential. While it is true that college-educated individuals generally earn higher salaries, here is a look at salary by education level and median wages in the US:
    • As of 2018, individuals with undergraduate degrees made ~$59,000/year, while those with a high school diploma made ~$35,000/year.
    • This earnings gap makes it generally attractive to obtain an undergraduate degree, however, attending college doesn’t guarantee $59k+/year.
  • According to the Federal Reserve, real median household earnings (numbers adjusted for inflation) were $52k/year in 1985. In 2019 it was $68k/year. Inflation increased by 135% during that period, while median earnings increased by 30%.  
    • If you are fortunate enough to be in the top 40% of earners, your wages at least kept pace with inflation, but we have 60% of our workforce moving backward due to inflation. This is exactly what is happening to millennials who do not obtain a college education.
  • Previous generations had the ability to get married out of high school, have one spouse work in manufacturing, purchase a house, two cars, and support a few kids....and receive a pension to boot. The sad reality is, when low wages, student debt, and inflation are factored in, Millennials won’t enjoy those same opportunities.

Cost of Housing –

Millions of Americans own a home. However, as a financial professional, I find myself having more frequent discussions with my millennial friends and colleagues about how difficult it is to purchase a house. For example, my friend Joe has been looking to purchase a home for roughly 1 year, has visited 50+ homes, and has had 6 different offers rejected because he was outbid after placing offers 10%-20% above the asking price. In most housing markets this is the norm. Per the Federal Reserve, the median home purchase price in Q1 2021 was $347,000, with most metropolitan areas seeing price increases of at least 10% year over year. On average, saving for the desired 20% down payment requires ~$70k down, which is a stretch when you’re simultaneously paying on student loans, hoping to have a wedding, and trying to invest for retirement. Millennials are working through the challenges, but it is definitely an uphill climb.

Political & Economic Instability –

Lastly, the Millennial cohort has learned that instability is the baseline of normalcy in life, both political and economic. Many of us were coming of age during the largest economic recession in a century and watched the largest domestic terror attack on television while sitting in elementary and high school classrooms (9/11). Some graduated into a once-in-a-century pandemic (COVID-19) and have witnessed one of the most unstable U.S. election cycles on record. These experiences have converged to create the belief that risk-taking is a dangerous choice, and it has influenced the behaviors of an entire generation.

Because of this, the Millennial cohort appears to have abandoned the “norms” of society. The reality is, Millennials are making choices based on their experiences, as all previous generations have. They have identified patterns in our social systems that they want to engage and address. For instance, Millennials don’t accept that institutionalized violence must be accepted (mass & school shootings, domestic terrorism, etc.), income inequality and food scarcity have to persist, and environmental issues can’t be solved. Just as generations past have forged a path forward, addressing the needs of the world they inherited, so will the Millennial generation.

Beliefs and values are guiding factors in Millennial decision-making, along with the belief that we can better the world for ourselves and our children. We believe that the world has to change because what worked in the past is not working in the present. That does not mean that past generations were wrong, only that they responded to the world as they knew it, as it existed then. If nothing else, we can all acknowledge that the world has changed, and continues to evolve before our eyes. Our goals are the same, to enjoy a long, prosperous, and generally peaceful life like the generations before us. For better or worse, we have inherited a different world.

Take away

I believe that the Millennial generation has been shaped by our collective experiences, including all of the hurdles we must overcome. We now have an opportunity to harness technology and communication to correct previous missteps to increase financial, physical, and societal wellbeing. Here are a few key areas that are important to Millennial financial planning:

  • ESG and Personal Value Driven Investing is here to stay –
    • The Millennial generation has the largest interest in ESG investing because we consider the “total return” when we vote with our dollars...not just a financial return.
  • We must save and look out for ourselves –
    • Pensions and benefit plans available to previous generations are not available to Millennials. Planning and saving for our own future has become mandatory because it is our only available option.  
    • The Millennial approach to financial wellness is more about the collective and can be seen in our openness to talking about money socially and in the workplace– a taboo in previous generations. Over 60% of millennials talk openly about their compensation value, structure and career outlook with colleagues and friends. This bodes well for millennials so we can better gauge our “market value” and take intentional steps to increase compensation over time. Effectively, talking about compensation is a new version of “sports talk” while having drinks on the weekend. If you’re comfortable with it, ask your colleague of comparable responsibilities what they are making – you might just get yourself a raise and help close the gender pay gap too!
    • Our long-term financial independence is in our own hands and we are learning that as soon as we enter the workforce. Our new annual savings target is 15% to become a “super saver” relative to the former target of 10%.
      • Millennials are saving more aggressively at younger ages and lower salaries.
      • Some Millennials want to achieve financial independence in their 30’s or 40’s so they are saving 30% - 50% of their annual income.
      • The question becomes what will they do with their wealth?
        • Their preferences for consuming experiences over goods will be intriguing to watch as they continue to aid in transforming the global supply chain and economy.  
  • Financial Planning is of increased interest due to the wide-ranging scope of global economic and geopolitical instability.
    • Financial planning could be a major solution to guide millennials to independence, more so than any prior generation.
  • Adaptability –
    • Millennials are the most adaptable and fastest-learning generation-- they plan to embrace technology and science to enable opportunities to create better lives for themselves and others.