Less Likely To Leave the Nest

It’s the American dream! Grow up, go to the right school, graduate… and move into Mom’s basement!

Okay… maybe that last part is the new “amended” dream. A record number of 25- to 35-year-old Millennials are opting to live at home, rather than leave the nest to live on their own. Specifically 40% of American Millennials currently live with their parents, compared to 10% of Generation Xers who lived in their parents’ home in 2000 when they were the same age.

But why are these young adults failing to spread their wings?

At First Glance
At first glance it might seem like Millennials (today’s 20-35-year-olds, although some argue 13-35-year-olds) are quite “spendy.” After all, when we were their age we didn’t walk into work sipping a $3.65 coffee, thumbing our $800 iPhone, which costs a minimum of $40 a month for service (but up to double that), another $7.99 for Netflix, and $10 for Spotify.

Sure, all the above is true. In fact, over 45% of 18 to 23-year-olds have spent more on coffee than investing in their retirement. And yes, they do love their phones. 98% of 18-24-year-olds and 97% of 25-34-year-olds own smartphones. And between 64% and 78% of Millennials have subscriptions to on demand video services like Netflix or Hulu… the higher percentage those who are “on their own” Millennials (because the lower percentage mooch off Mom and Dad).

But as much as studies have shown Millennials struggle to manage their finances, we might want to show a little understanding… which might actually require us to step into their shoes for a moment (something I wish I would have done more as I look back at my own parenting).

Step with me.

The Real Numbers
First, apartment rent is higher than it’s ever been. It went up by 4.6% in 2015 alone, the biggest leap since before the recession. That’s just one year. I personally know several Millennials who were on their own who moved back home this year (we call those “boomerang kids”) when their rent was raised by three digits monthly.

But rent bumps don’t even compare to the mountainous hikes in education cost. In 1980, the average annual cost of room, board, tuition, room and fees at a four-year college was $9,438. Now it’s $23,872. That’s a 260% increase compared to the nearly 120% increase in all consumer items. And up to 19% more young people are completing at least four years of college compared to 1980 (19% more females and 12% more males).

Greater cost is creating greater debt. The average burden of debt for college graduates today has more than doubled within the Millennial Generation. Graduates of the Class of 2016 are strapped with an average of $37,172 in student loans upon graduation day (over $65,000 in the UK). Class of 2003 owed just $18,271. This will take most students 10 years to pay off, forking out $429 monthly (or 7.5 years if they add an extra $100 a month to their payment).

Maybe that’s why over a third of graduates actually regret going to college when they look back at their debt. In fact:

• 37% of graduates regret going to college when they consider their debt
• 49% believe they would have reached that same level in their career even if they didn’t go to college
• 63% said they were “relying on a one-off event” such as winning the lottery or an inheritance to pay off debt

But at least this far better educated generation is earning more than their parents… right?

Sadly… not much.

And here’s where the numbers differ (a common problem with headlines- people love to yank out stats that help prove their case). A brand new analysis of Federal Reserve data claims Millennials actually earn 20% less than Boomers did at the same life stage (a median household income of $40,581). The report states, “Education does help boost incomes, but the median college-educated millennial with student debt is only earning slightly more than a Baby Boomer without a degree did in 1989.” And the median net worth of Millennials is 56% less than it was for Boomers.

Sounds bleak. But just a few years ago Pew Research revealed a much more optimistic look, showing a slight increase in income by generation when compared in “today’s dollars,” and revealed a greater disparity in income now between college grads and high school grads. I don’t want to go off on a rabbit trail, but as a quick “shout out” to kids who are looking at college, this report isn’t alone. Forget the generations for a second: The Bureau of Labor Statistics revealed a huge gap between incomes when you compare current educational attainment. For example, in 2015 a person with a bachelors’ degree made an average of $1,980 more per month than someone with just a high school diploma.

An extra $2,000 a month will sure help paying off that $429 a month school loan, don’t you think?

So how are “on their own” Millennials paying bills?

With their thumbs.

They aren’t just using their thumbs to scroll through Snapchat stories… they’re thumbing rides, because they don’t own cars. Millennials don’t care about cars like previous generations. Fact of the matter, over half of Millennials either don’t intend to purchase a car or don’t see it as a priority. Only 15% say a car is really important, and another 25% think it’s important, but not a big priority.

Millennials also moonlight, using their skills to earn extra money. Linked In shows the number of Millennials freelancing on the side is growing logarithmically, far more than those freelancing full time.

But Millennials are also proving to be pretty savvy shoppers. Most of them shop with their phone in hand, comparing prices and trying to find the best deal. They are actually less likely than previous generations to buy something simply because it’s convenient. They focus on value.

Think Twice
So I guess parents should probably think twice before we say, “When I was your age…” because all things being equal you’ll have to admit, “I made more, paid less in rent, paid less for school and spent way more money on my car!”

So what’s left for parents to do?

Conversations. Not lectures, but conversations about budgeting and spending.

I remember my dad taking me out and showing me how to make a budget on a napkin. He allowed me to choose how I wanted to spend my money, but I had to make a budget and stick with it. If I wanted to spend half my money on girls (I did), then that was my choice (bad choice). But I learned to notice what I spent.

If your kids spend too much on Starbucks, don’t forbid them from it… just make them track their spending. When they sit down at the end of the month and have to write down “Coffee: $96”… it might make them think twice.

Help them think about the future.

If you have a kid in college… take them out to dinner and affirm them! Let them know their hard work is going to pay off. Show them the numbers above if you must.

If you have a pre-college teen… still take them out to dinner and affirm them! Engage them in a conversation about their education goals. Give them information so they can make an informed decision. Show them charts showing the disparity in income between those who get degrees and don’t get degrees.

If you have a toddler… take them to Chucky Cheese and jump in the ball pit with them! Then when you tuck them into bed that night read them Beatrice Potter books. Readers are learners. They’ll probably want to go to college before you even bring it up.