Young Adults Forced to Choose Between Needs and Dreams

Despite their increasing riches, young individuals continue to live and spend in the present. Many believe they are without options.

Wealth Trends and Spending Habits Among Young Americans

According to study by the Federal Reserve Bank of New York, the net worth of Americans between the ages of 18 and 39 increased by 80% between the beginning of 2019 and the third quarter of 2018, much above the rates for older generations.

However, the majority of the profits came from investments that rose in tandem with stock markets and don't usually correspond to extra cash on hand. Even while a large number of millennials (those between the ages of 28 and 43, according to Pew Research) and many of their Gen Z near-peers (12 to 27) are earning more money, they are still using it for more expensive daily costs, such as rent, rather for indulgences like leisure travel.

In a recent CNBC study, 42% of respondents aged 18 to 34 stated they were making more money than they were a year earlier, while 27% claimed they were making less. Only 11% of respondents could sustain their monthly spending for a year, while almost half indicated they couldn't. According to a recent Bankrate survey, just 32% of Gen Zers and 37% of millennials are satisfied with their emergency funds, while Gen Xers felt marginally better (38%).

However, even as the economy slows down, younger Americans are spending more on leisure, vacation, and eating out than their older counterparts, even a few years after the COVID lockdowns. According to a Morning Consult research from last summer, the average Gen Zer or millennial was spending more than $400 a month on non-essentials, while Gen Xers spent around $250 and baby boomers spent less than $200.

This accounts for the rush of press surrounding "doom spending," which describes how customers (mainly younger ones) allegedly purchase wildly to allay fears about uncontrollable forces in the economy, environment, and geopolitics. In response, there has been a chorus of criticism, with some TikTokers advising others to practice "loud budgeting" by politely denying requests to spend money and explaining to friends why.

Changing Credit Landscape and Economic Realities for Young Americans

TransUnion estimates that in 2023, the percentage of bank card balances held by millennials will surpass that of baby boomers for the first time. This is partially due to the fact that younger consumers-like their predecessors-are accruing and utilizing credit at an increasing rate as they age. However, according to Michele Raneri, vice president and head of TransUnion's U.S. research and consulting, "they're doing so in a vastly different climate and with steeper consequences due to the combination of high rates and high inflation."

TransUnion observed that from the fourth quarter of 2022 to the same period last year, delinquencies for sums more than ninety-nine days past due increased 2.6% across all age categories, the largest level in ten years.

Even affluent young individuals claim that it is difficult to plan ahead when a significant portion of their increasing income is allocated to immediate needs.

In a September Redfin study, over 18% of millennials and 12% of Gen Zers stated they thought they would never buy a house. One of the main justifications was cost. The median price of a home sold in 2019 was 30% more than it was at the start of the year, and some people are now using their funds for other purposes instead of down payments.