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Millennials and Their Money: The Kids Are All Right

Despite concerns student debt, financial crisis would alter spending habits, millennials' goals similar to boomers'

Unsplash / Getty Images / Morning Consult illustration by Czarina Divinagracia
  • If given an extra $1,000 in a month, millennials and baby boomers would spend similarly.

  • 35% of millennials said they have under $5,000 in credit card debt compared to 34% of baby boomers.

  • More millennials took out student loans than baby boomers.

Millennials, if headlines are to be believed, are killing napkins, credit cards, divorce, American cheese, sex, mayonnaise, drinking and kitchens.  

It’s become a bad trope, but underpinning those generalizations is the fear that millennials, scarred by the financial crisis, could spend more conservatively, or at least differently, from their baby boomer parents. If true, that could stymie consumer spending, alter consumer debt markets and slow housing market growth.

But according to a recent Morning Consult/Business Insider survey, those fears may be misplaced. Millennials, it turns out, aren’t that different from their baby boomer parents in how they spend and think about money.

“Right now, millennials are in their 20s and 30s, and the types of financial decisions they’re making are typical of someone in their 20s and 30s,” said Sara Rathner, a personal finance expert at NerdWallet Inc. “In 40 years, millennials will probably be in much the same place as baby boomers are today.”

For example, when respondents were asked what they do with an extra $1,000 in a month, millennial priorities largely line up with their baby boomer counterparts.

Saving and investing money topped both generations’ lists. Half of baby boomers would use the extra cash to pay down debt or save, compared to 46 percent of millennials.

And despite a popular narrative that millennials opt to spend their money on experiences, baby boomers were more likely to say they would use the extra $1,000 to travel at 7 percent. Only 3 percent of millennials said the same.

The two generations also report having relatively even amounts of credit card debt. Most millennials (35 percent) said they have under $5,000 in credit card debt compared to 34 percent of baby boomers.

That credit card debt could actually be a larger problem for baby boomers than it is for millennials. “As baby boomers reach retirement, often having more debt can be a financial challenge, while millennials have their entire earnings trajectory,” said Sarah Sattelmeyer, who manages Pew Charitable Trusts’ student borrower success project.

All that isn’t to say that millennials and baby boomers are exactly the same. There’s some evidence that millennials are hitting traditional life stages — buying a house, getting married and having kids — later than their baby boomer counterparts. Most research attributes this to mounting student loan debt and, for older millennials, graduating from college in the middle of a financial crisis.

But it’s likely that millennials will eventually reach those milestones, just at a later age. According to Federal Reserve research published in November, adjusted for age and other factors, “millennials do not appear to have preferences for consumption that differ significantly from those of earlier generations.”

Although fewer millennials have a retirement savings account compared to the baby boomers, according to the Morning Consult/Business Insider survey, experts say younger people often put off retirement savings until they have a job that offers a 401(k).

“You’ll see usage and contribution rates increase over time as millennials mature and earn more money,” said Chris Donahoe, senior vice president for financial communications at Edelman, which released a study on millennials and money in October.

Millennials also tend to spend more on housing, according the Morning Consult/Business Insider survey, but economists say it’s normal for a person in his or her mid-60s to own a home and begin earning equity instead of paying rent, while that’s uncommon for people in their early or mid-20s. It’s also more likely that, in the upswing of their careers and without children, younger people will opt to live in cities where rent is higher.

The survey shows that the biggest financial difference between millennials and baby boomers is in the number of people who said they have never had student loans.

In the United States, student debt loads have shot up in recent years, according to Federal Reserve data, and servicing that debt takes spending or saving dollars away from millennials every month.

Still, these student loans haven’t seemed to change the way millennials approach their money, Donahoe said. The student debt will likely delay millennials’ big financial decisions, such as buying a house or having kids, but not alter it entirely.

“Financial behavior among millennials doesn’t seem to differ that much from other generations, despite the big difference in student debt,” Donahoe said. “We’re still basically doing the same thing, buying the same thing and protecting ourselves the same way.”