Millennials 'more likely to face working-age poverty than any previous generation'
Millennials do not own a home and do not invest in the stock market
The generation of millennials, young people who have come of age with the entry of the new millennium, has a much more complex present and future than other generations. Millennials hardly own their homes and have no financial assets. However, they do have a significant burden of debt, especially consumer credit to buy goods and services that will not generate a return in the future. In conclusion, Spanish millennials present a much more complex financial situation than past generations.
According to economists, when this generation began to enter the job market, the economic situation has been against them for a large part of the time: "And it was particularly adverse for the millennials born after 1987, which, with a deep crisis in the making, saw many of their job expectations frustrated or, at least, had to leave them in the bedroom, waiting for better times. "
Complex job market
"Finding a job is not easy for them: the unemployment rate of millennials is 26% (in 2016), much higher than that of the previous generation (generation X) when they were the age that millennials are now ( 17%, in the year 2000) ".
Other experts and financial entities have expressed themselves along the same lines, such as Credit Suisse, which highlighted in its annual report on world wealth that the 'poor' millennials "faced the difficulties of the financial crisis. . and were also beaten by prices high and rising housing, growth of student debt and rising inequality. the millennials not only experience greater difficulties in generating wealth over time, but they will also have greater wealth inequality than previous generations. "
Comparisons with the baby boomers generation (born between the 50-the 60s) may not be entirely fair, but the Swiss bank showed that young people of the millennial generation are doing worse than their parents when They were the same age, especially when it came to income and home ownership. Their outlook on pensions is also worse than previous generations at the same age.
It's not just the comparison to baby boomers that leaves millennials in a bad position. If compared to other later generations, the differences are still huge. Judit Montoriol and Cristina Farras, show that just having been born a few years earlier could have generated a very considerable difference in terms of wealth.
CaixaBank experts have compared the evolution of the median net wealth of each generation throughout the life cycle. The result shows that "generational differences are very significant: in the US, the median net wealth of millennials between 25 and 34 years old is 60% of the median wealth of a young generation X in the same age group."
"In Europe, an even greater difference is observed: the trajectory of the net wealth of each generation is below that of the previous generation and, in the specific case of millennials, their median net wealth is 3,000 euros compared to 63,400 euros accumulated by young people of the previous generation when they were the same age, "say the economists of the Catalan bank.
8.8% of generation X invested in the stock market, compared to 4% of millennials, while something similar occurs with investment in mutual funds, according to data from the Financial Survey for Families.
This abysmal difference in the case of the United States, but especially in that of Europe, is due to the fact that most millennials do not own a home. In the case of Europe, 44% of millennials own a home, compared to 65% of generation X when they were in the same age bracket.
If it is compared with the total of the population, the situation seems even worse since around 79% of the population owns a home. In addition, 46.9% of the population owns a home with no pending mortgage burden (Eurostat data), while the opposite occurs with millennials, in the absence of concrete data it can be assumed that few have the Homeownership already paid for since they need to dedicate triple the income of baby boomers to pay for their house. In the case of Americans, only 34% own a home, while the general data for owners is 64%, much lower than the figure.
But it is also explained because the young people of this generation have a heavy load of debts that are not related to the real estate sector.
Many can be debts to pay for university studies, especially in the case of the United States. This type of debt can be considered an investment since training can offer a significant return in the long term.
However, in the case of millennials, the situation is somewhat different and perhaps even more serious. Most of the non-mortgage indebtedness of this generation is consumer credit, which normally does not represent any type of future performance. This type of debt is acquired to buy goods (cars, TV ...) or services (such as travel).
"The non-mortgage indebtedness of millennials is also higher than that of the previous generation: 33% of those who do not own their home have some type of debt, mostly consumer credit. In addition, the financial burden of this debt (debt payments) represents 21% of household income, much higher than 13% of comparable generation X households, and 33% suffer financial stress ", highlights the CaixaBank experts.
The unfavorable financial situation of millennials places them in a worse starting position to be able to face future challenges, the most relevant of which are facing their retirement ... In European countries, the aging of the population has led to the reform of public pension systems, reducing their generosity, say the CaixaBank economists.
Despite these data, it seems that young people do not fully understand the difficulty they will face in the future. With regard to the US "there is an increase in the participation of young people in pension plans, contributions have decreased as a result of the Great Recession. And, in Europe, only 10.6% of millennials have a pension plan, although a great majority (70%) think that the public pension will not be enough to live ".
However, if life expectancy does not increase dramatically, millennials could reach retirement age with a more balanced pension system. As the baby boomer generation fades, maintaining pensions could be more sustainable or 'cheaper'. "The most important challenge for pensions lasts until 2050 ... I don't think there will be problems paying the pension of that generation (millennials)", highlighted a few months ago by Miguel Ángel García, pension expert and professor of Applied Economics at the Rey Juan Carlos University.
"Ultimately, the financial situation of millennials is not very promising and it is essential that the financial decisions they make in the future are the most correct," says the Catalan bank document.