Hey, guys.
It's Chelsea from The Financial Diet.
And this week's video is sponsored by monday.com.
And today, I want to talk about Boomers versus Millennials,
especially when it comes to how we both respectively
view and do money.
Now the stereotype of the lazy entitled millennial
has been debunked over and over again
including on this channel.
We did a whole video about it a while back,
and I'll link you to it in the description.
And generational stereotypes can have
a negative impact on anyone, not just millennials or Gen Zers
of whom I'm deeply afraid.
For instance, one Harvard Business Review study
found that when undergraduates were
asked to train another person on a computer task using Google's
chat function, when "trainers believed that they were
teaching an older person how to do the computer task,
they had lower expectations and provided worse training
than when they believe they were teaching a young person.
These results demonstrate that poorer training
is a direct result of age stereotypes."
It is still important to understand, though,
that generational stereotypes do exist because in many ways,
the world does change.
And when it comes to money, millennials
do money differently than boomers did, and still do,
because they have to.
And so I want to explore how and why these two generations have
such different relationships to money.
And one of the first reasons is that millennials have
just on average lower income.
According to a 2019 report from the nonpartisan think tank New
America, millennials earn 20% less on average
than boomers did at the same stage in their lives.
And this is despite the fact that millennials
are better educated as a whole.
The Pew Research Center found that "nearly 40%
of millennials 25 to 37 have at least a bachelor's degree,
compared to just a quarter of baby boomers, and 30% of Gen X
when they were the same age."
Now much of this is largely due to wage stagnation.
We have seen over and over again that as productivity has vastly
increased over the years, largely
in part due to the combination of people who are more and more
skilled with more and more effective
technology that allows us to be more productive.
Our wages have not just not caught up
with the level of productivity, they've not even
kept pace with costs of living or inflation,
which is why the millennials are lazy debate can
be so particularly frustrating.
In addition to the fact that on aggregate millennials
work incredibly hard, they're also
working for a world which increasingly
compensates them less.
And frankly how can we expect people
to be overly motivated to work when they do so to barely make
a living wage?
For those keeping track at home, the federal minimum wage
is currently $7.25 an hour, which most of us
are now aware of because it literally
hasn't changed in 10 years.
And according to the Economic Policy Institute,
"In 1968, a minimum wage worker earned $10.59 per hour
in inflation-adjusted terms, 46% more than today's 7.25
minimum wage.
The minimum wage today would be over $22 per hour
had it tracked productivity increases over the last five
decades."
So with a lower average income to start, basically
every subsequent choice that millennials are facing
are going to be different than what boomers were dealing with.
Another way in which things are just different for us
is that millennials increasingly work multiple jobs.
A Census report from earlier this year
found a rise in the number of people working multiple jobs.
"An estimated 7.8% of US workers had more than one job
as of the first quarter of 2018, up from 6.8 in 1996.
The earnings from the workers' second jobs
make up an average of 28% of their total earnings,
showing that workers are likely relying on that pay,
researchers said.
They also noted that multiple job holdings
occurred at all levels of income but was more common
for low wage workers.
Those juggling more than one occupation
earned less, on average, than people who only had one job."
So we start to see how all of that sort of hustle culture,
girl bossification that millennials became notorious
for especially in the past decade comes from a real need
to adapt to the reality of needing
to work multiple jobs in order to get ahead.
And when you combine that with the fact
that millennials on average are dealing
with about $37,000 in student debt, a reality which
most boomers never had to deal with,
you start to understand the extent
to which having to work multiple jobs in order
to sustain yourself and to pay off your debts
becomes your new normal.
And it's not surprising that you'd
find different ways to adapt to and even in some level glorify
that.
I think we're starting to see the tide turn
a little bit on that hustle culture glorification,
but I do think it's worth examining
exactly why it came to be so popular in the first place.
It's also worth noting that that particular cultural phenomenon
continues to fly in the face of that perception
that millennials are lazy.
Not only are they working, in many cases
they're working multiple jobs.
And this data lines up with a SunTrust Bank survey from 2019
that found that millennials are working more side
hustles than previous generations.
"Specifically, 64% of millennials
said they have a side hustle or have had one in the past,
compared to 58% of Gen Xers and 44% of Baby Boomers.
Millennials surveyed said they made
an average of $10,972 per year from their side
hustles according to the survey, which is 20% more than Gen Xers
and 46% more than baby boomers."
For some, there's always been a need to work multiple jobs.
But for millennials it basically became a de facto part of life.
Which brings us to another reality
that a lot of millennials are faced with,
and boomers frankly continue to misunderstand which is
opting out of home ownership.
We are constantly being inundated,
especially as we come out of the pandemic,
with report after report about how millennials are not buying
homes and not having kids.
But in addition to the realities like lower income overall
and the student debt I mentioned earlier,
there's also a real change in just how much
it costs to become a homeowner that
is dissuading so many young people from doing it.
According to data from the Federal Reserve,
"Millennials only own 4% of American real estate by value.
A lot less than the 32% of real estate value
baby boomers owned at that age."
Homes are more expensive now than they
were for boomers buying their first home decades ago.
"In November 2017, real estate website Zillow
showed that the median home value was a whopping $205,100.
Compared to what baby boomers might have paid in 1980,
that is a 39% increase.
And compared to the homes in which the silent generation
grew up, you're looking at a nearly 300%
higher price in today's dollars."
And rental costs are also higher than they
were in previous decades.
According to the US Census Bureau, in today's dollars,
the median gross rent in 2000 was $866,
compared to 758 in 1980.
And with that lower average income,
not only are the houses millennials are
looking at potentially buying--
Hello, Mona's a Zoomer.
Actually I don't even know.
Mona was born in 2014 so that's a Zoomer.
Well, she loves TikTok, and she loves wide leg jeans.
And she loves center parts, and she
doesn't care about any of this.
And when you combine these increasing housing
costs with lower overall income, you're
also talking about a home purchase that makes up
a greater percentage of millennials overall income
or wealth.
In 2018, SmartAsset found that 21.6% of millennials' annual
spending went to housing costs, compared to 19% of Gen
Xers' and 17.6% of boomers'.
But it's also worth noting that millennials
are just generally not that interested in buying
all of that absolutely hideous, cheaply made,
way bigger than necessary McMansion housing stock
that boomers and Gen Xers were famous for propagating
in the 90s and the early odds.
And this may end up being a real financial problem for boomers.
According to a 2019 article in The Wall Street Journal,
"The problem is especially acute in areas with large clusters
of retirees.
In North Carolina's Buncombe County, which draws retirees
with its mild climate and Blue Ridge Mountains scenery,
there are 34 homes priced over $2 million on the market,
but only 16 sold in that price range in the past year,
said Marilyn Wright, an agent at Premier Sotheby's International
Realty in Asheville."
As we spoke about in a previous TFD video, which
we'll link you to in the description,
house size got out of control.
And it was basically everyone's objective
during that specific period in real estate history
to basically own a small castle made out of particleboard.
And it's no surprise that with those inflated ticket prices,
and when you combine it with the fact
that millennials in general are much more concerned with things
like not having more than they need
and living a more eco conscious lifestyle,
buying up giant homes in the middle of nowhere
is not exactly top of their priority list.
And because of all these problems,
millennials are increasingly looking
beyond traditional banking.
So with technology giving rise to just so many options
when it comes to financial management
outside of traditional brick and mortar setups,
it is no surprise that the way millennials
bank period looks very different from previous generations.
"When millennials are dissatisfied with their bank,
they are not afraid to move to greener pastures.
They are 2.5 times more likely than baby boomers
and 1.5 times more likely than Gen Xers to switch banks.
Additionally, millennials want banking products and services
that offer a little extra bang for their.
Buck In a Kasasa survey, 83% of millennials
said they'd be willing to switch banks for better rewards, such
as higher interest rates on deposit accounts, cash-back
on purchases, and foreign an ATM fee refunds.
And 94% of millennials also said that no-fee banking
was a priority."
And perhaps this is due to millennials
growing up in a world in which brick and mortar
banks were increasingly nickel and diming people.
In 2019, the average cost of using an out-of-network ATM
was 4.72, when 20 years previously it was 2.28.
And in 2019, overdraft fees were $33.36,
compared to 22.60 in 1999.
So in some ways although millennials
do have overall fewer financial options,
they are also much more savvy about making the most of what
they have and demanding that their financial services
companies work for them.
Which brings me to my final point.
One of the areas in which we see the most extreme discrepancies
between boomers and millennials and the financial world
in which they're living in is when
it comes to retirement, which in many cases
is not often working for millennials.
According to a joint survey from INSIDER
in Morning Consult, a global data intelligence firm,
more boomers have retirement accounts than millennials.
However, "nearly 46% of boomers aren't currently putting money
aside each month for retirement, whereas only 35% of millennials
aren't.
Millennials who are putting money aside
regularly also save more money a month
for retirement than boomers do."
However, while millennials may be generally more informed
about what they need to do with their finances,
that doesn't mean that they are ahead of boomers financially.
More millennials than boomers expect
to never retire at all-- around 9%, compared to 4% of boomers.
And 18% of millennials don't know
when they'll retire, compared to 13% of boomers."
It's become almost a meme amongst millennials
and I'm sure Gen Xers to basically be like,
my retirement plan is getting hit by a bus.
But it's important to note that this reality in a world where
we're seeing fewer and fewer pensions and fewer
employers who offer any kind of retirement plans at all
and also a state sponsored retirement system that is not
even remotely enough for most people
to live on, that if you are not able to get
past that low income, even while working
multiple jobs as many millennials do,
the thought of planning for retirement
can seem both overwhelming and totally futile.
We of course recommend that everyone
take planning for their retirement very seriously.
But we also must be realistic about the fact
that saving robustly for retirement
is just not an option for many millennials.
And it's important to also note that, to be fair,
not all millennials are struggling.
And especially post pandemic, we are
starting to see an increasing wealth
gap within the millennial generation
itself along all of the indices that we talked about today.
"Less than a year in, the pandemic has ultimately
inflamed a millennial divide, widening
the gap between the generation's rich and poor.
Millennials are experiencing their own K-shaped recession,
which is uniquely compounded by two recessions.
This will naturally lead to an unequal recovery
between these two groups, Jason Dorsey,
president of the Center for Generational Kinetics
said, with those who lost a job taking longer
to recover than those who began the pandemic with a better
financial backstop.
We're going to see a growing divide between the millennials
who've weathered the storm financially well,
and those who are really struggling financially,
Dorsey said.
And I think that's only going to grow as they come out
of this at different speeds."
Now my larger point is to never judge
any individual of any generation based on stereotypes
about that generation.
But I also think it's always important to interrogate
that when we compare generations against each other,
we're not just talking about individual human beings
in a vacuum who are all starting from 0
and playing the exact same game and analyzing the choices they
make within that game on an equal playing field.
We're talking about generations who exist and move
around and have choices within vastly, vastly different worlds
and contexts.
My hope here is that we can start
to understand a little better what
leads to the extreme gap in perception between boomers
and millennials and hopefully understand
that these gaps exist between all generations.
And the ideas should be making a better life
with a better set of choices for each generation to follow.
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As always, guys, thank you for watching.
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Goodbye.