Part one of this three-part series was intended to foster understanding about how incredibly different today’s challenges are for Millennials relative to previous generations. In this edition, I want to take on some of the “assumptive views” that are regularly associated with Millennials as well as challenge the stereotypes that keep us from productively engaging with one another across the generation gap. I’ll also examine historical societal expectations, how well they do, or don’t, fit the experience of the Millennial Generation, and how we might think about adjusting them.
Assumptive views - the “Frivolous Spending, Avocado Toast & Latte” Generation
If you read any news source you’ve likely seen an article with a title similar to “Millennials waste their life savings on lattes and avocado toast.” As a “super saver” Millennial and financial planner, these articles frustrate me. Let me explain:
Based on the average house purchased in Q1 2021 costing $347,000, take a guess at how many $4 lattes you’d have to forgo to accumulate a 20% down payment.
- Would that be 3 years of lattes? 10 years? Nope, it’s nearly 48 years of daily latte stops. Like many of the daily coffee drinkers I know, I make my cold brew at home, but I’m comfortable caffeinating at a local coffee shop too knowing that I’m supporting local and my coffee won’t bankrupt me.
- How about the famed Millennial avocado toast for $10...it would take 19+ years of daily avocado toast to save for a down payment.
- Millennials enjoy spending incremental amounts on “treats” as a way of recognizing the work and time we’ve put into our careers and ourselves, relative to larger material goods that previous generations preferred to acquire.
Our priorities are different -
Why do the same job with the same company for your entire career?
- Through conversations with grandparents, parents and mentors, we can’t count the number of times we’ve heard “why are you always changing jobs?” and “why don’t you just stay at the same company like I did?” In a recent conversation with a mentor of mine, she noted that she felt like our generation seems a bit “disloyal” because of our willingness to change jobs and companies so readily. As an answer, I’ll reference the first blog in this series, the Millennial Generation inherited a different world from that of our parents and grandparents. As a generation we have to look after our own interests first since we won’t receive lifetime pensions and healthcare after 20-30 years of work. If this was an option for Millennials you might see more of us stay put.
- Not only do we not receive the same benefits that prior generations do, we are now expected to support all of these programs. Social Security and pension plans across the country have funding issues right now, and I’ll summarize why they’ll likely continue to deepen:
- Currently Social security has ~36 retirees receiving benefits relative to every 100 workers paying into the system. By 2049 there will be a ~30% increase to 46 retirees to every 100 workers. This is likely to burden Millennials with having to pay a disproportionate amount of taxes/pension dollars into the system to support previous generations, almost entirely at our own peril. Since the system will likely not be available to us, It’s not a fair shake. If you’d like to see a graphic representation of the Social Security system, there is a great chart on the Federal budget HERE.
- With that in mind, changing jobs every 2-3 years is statistically the best way to increase your compensation and earn promotions for at least the first 10 years of your career. If we don’t look out for ourselves today, who will in the future? To my fellow Millennials, if you didn’t get that raise or promotion, get online and find yourself a new opportunity!
We want different benefits from our jobs.
A recent study by Glassdoor.com found that 21% of Millennials have changed jobs in the past year. Pay and growth opportunities are key factors, but other top issues are:
- A study by Bentley University found that 77% of Millennials credit flexible work schedules such as making your own hours, working in a hybrid arrangement or working fully remote as a primary driver that increases their productivity, satisfaction and retention in their jobs.
- Work-life balance includes commuting time. The ability to work from where you want, generally when you want allows us to save time commuting, which translates into more time available to be spent on personal wellbeing, health, and hobbies.
- We want to avoid burnout. Long hours in the traditional work environment have caused some to leave for freelance and “gig” work; however, most Millennials still want the stability of full-time work – just not at 40+ hours/week.
- Increases in paid time off (sometimes unlimited, depending on the company), extensive health and wellness programs, paid maternity & paternity leave and working with colleagues that promote autonomy and growth also made the list of key considerations.
Homeownership, does it make sense?
- Homeownership has always been a hallmark of the “American Dream” and adulthood. This concept is continuing to evolve for Millennials.
- Many Millennials don’t want the headaches of maintenance, want to move regularly (Millennials move more frequently than any prior generation), work remotely or simply want flexibility, making renting a great option. Since our work and life timelines are expected to be longer than any previous generation, we don’t have to rush into purchasing a home, getting married and potentially having kids. It’s now acceptable to rent through your 20’s and 30’s as we figure out what we want at each stage in our lives.
- It’s true that real estate is an asset, but you can invest in other traditional and non-traditional asset classes as well—stocks, bonds, publicly traded P/E and hedge funds, crypto, etc. Each of these assets have the ability to grow over time, while generally maintaining liquidity and not having major transaction costs (7+% for real estate commissions, fees, taxes, etc.).
- It’s great if your home increases in value, but it’s difficult to benefit from the equity in your home while you’re living there unless you borrow against it. With that being said, a majority of Millennials still aspire to own a home. Although, the type of home we want tends to be smaller (1,700 sq. ft), more sustainable, and location driven compared to other cohorts.
- Our smaller homes generally lead to lower costs of ownership and less upkeep. The notion of cleaning your gutters, cutting your lawn, and working on the backyard or garage all afternoon isn’t what a lot of us want from home ownership anymore.
- Additionally, as a generation we are skeptical of traditional investments due to coming of age during the financial crisis, when we watched as millions of average Americans lost their home, car, job, or benefits. While it’d be great to say that it hasn’t impacted our generation, those experiences have influenced how we think about taking on hundreds of thousands in debt via a mortgage.
- For further insight, here is a well-produced study on Millennial households by Pew Research.
Dude, where’s my car?
- We all know that deprecating assets don’t make for good investments, yet you’ll find a shortage of automobiles, particularly expensive trucks, and SUV’s, at dealerships right now. Millennials aren’t nearly as attached to cars as previous generations due to the cost of ownership, choice of urban living (you generally don’t need a car when you live downtown), increased use of alternative transportation (biking, walking, subway, etc.) and ridesharing or transportation apps like Uber, Lyft, Lime & Bird.
- For context on how some Millennials think about vehicles, let’s make a deal – you give us $50,000 today (the cost of the average new truck in 2020) and we’ll give you $30,000 in three years for an asset you likely use less than an hour a day. We’ll then invest the $20,000 differential every three years (or $50,000 if we don’t buy a vehicle at all) and end up ahead of you at the Porsche dealership...just kidding. But we might be sitting on a beach or financially independent instead.
Children are an expectation, but should they be?
- How many of you remember your family, friends and perfect strangers asking when you plan on having kids nearly the moment after your wedding? As a recently married Millennial, I still get questions about kids regularly.
- Becoming a parent is a cultural expectation, but Millennials across the globe are thinking twice about whether they want to delay having kids or whether to remain child-free entirely. A few statistics support this:
- Only 44% of Millennials were married in 2019, relative to 61% of boomers and 81% of the silent generation at the same age.
- Only 30% of millennials in 2019 lived with a spouse and child, down from 46% for boomers at the same age.
- Stability and happiness are two recurring themes that influence Millennials and it is definitely reflected in our family planning decision making. We want to be more financially secure than prior generations before having children. This generally means having two working partners and delaying childbearing. We also tend to focus on our own personal happiness and wellbeing more than prior generations, which is supported by multiple cross-generation studies confirming that child-free couples generally exhibit higher levels of happiness, security and satisfaction with their lives relative to adults with children. Child-free living is likely to continue growing in popularity, so keep your mind open when someone says they don’t want children.
- Lastly, today the average cost to raise a child to age 18 is $250,0000, excluding college. This alone, is reason enough for some Millennials to hold off on having children when they are generally on shaky financial ground.
Food for Thought -
- Communication and open-mindedness are key – Next time you are having conversations with your children, their friends, colleagues or the guy with a man bun and tattoos at the local brewery have an open mind. Each of them likely see the world differently than you do because of their personal and our collective experiences as a cohort.
- Financial Security – As a generation, Millennials want to establish some level of financial security prior to getting married, buying a home, and possibly having children, which is why we are consciously delaying each of these prospective life events.
- Happiness - Each millennial’s happiness is defined a bit differently, but as a whole, we seek work-life balance (less hours in the office or less hours working in general), new experiences, financial mobility and physical & mental health. Our focus on ourselves is not selfish, but an investment in our long-term wellbeing.
- For boomers & older generations - avoid saying “when I was your age,” as our opportunities and world are different from yours at the same age. Your sage wisdom can likely still be applied today, it just doesn’t overlay exactly, and we find ourselves more open to your counsel when it comes with open communication and understanding.
- Workforce – Millennials are now the largest working generation in the workforce. As our preference for work structure and benefits evolve, companies will need to keep pace to retain talent.