When the financial crisis hit ten years ago, Millennials weren’t affected as much as Baby Boomers or Gen Xers were.
They didn’t lose the bulk of their real estate or stock market value. Most were only teenagers at the time, some as young as eight.
Now young adults, many are earning a good living, and some even have a good chunk of money set aside and are moving up.
But just because they are paid well and have money doesn’t mean prospering Millennials emerged from the financial crisis unscathed. The impact of the crisis, which began 10 years ago this month, is evident in how they spend, save and manage their money, according to a new study from Merrill Edge.
This cohort of affluent Millennials — people ages 18 to 34 who earn more than $50,000 and have $20,000 to $50,000 in investable assets — is taking a more deliberate path. Overwhelmingly they’re delaying major milestone purchases like real estate, cutting back on discretionary spending and taking a fiercely self-sufficient approach to their money. And there’s evidence, according to the study, these decisions are in direct response to the financial crisis.
“Millennials playing it safe, being risk averse and self reliant is very much a reaction to what they saw in the financial crisis,” says Aron Levine, head of Merrill Edge. “They saw that their parents and grandparents lost a great deal of money during that time and they want to be more cautious.”
An overwhelming majority, 85%, say they are likely to “play it safe” with their day-to-day finances.
According to the study, the recession gave Millennials pause when it comes to big life investments. For 78%, the recession was a factor in their decision to buy real estate. For 58% it affected their higher education plans. And for 53%, the financial crisis led them to put off having children.
And they’re well aware these rosy days could end at any time: 80% of affluent Millennials say they’ll see another recession in their lifetime. Three in 10 think it will happen in the next ten years.
Although they are delaying having kids, the top definition of success among these young people is to provide for a family (73%), followed by having a family (52%) and making a difference (41%).
“They want to have kids and a family,” says Levine, “but they want to know they can provide for them first.”
Baby Boomer values like having an impressive résumé and having a million dollars were non-starters for these above-average earning Millennials: only 11% and 9%, respectively, said that was their idea of success.
When asked what they are likely to rely on most in 20 years, Millennial’s top response was their own savings account. While Gen Xers were more likely to say they’d rely on their 401(k) and Baby Boomers on their pension and Social Security, young people were confident they would not be depending on their family, their company, or their government.
While most Americans have a paltry savings rate, 38% of these young people are socking away half of their paycheck. They’re also curbing spending in other ways, including the 54% who say they are cutting back on going out and the 42% who are skipping vacations so they can save more.
Though they are saving, they are retiring the idea of a quaint retirement.
“This idea that I’m going to work for a certain amount of time until I have a certain amount of money and then I can retire, that is no longer the premise,” says Levine. “Retirement as a concept has changed to, ‘I want financial freedom,’ that could be in your 40’s or 60’s or later.”