millennial debt


He uttered random phrases in Hindi to the confused Bengali shopkeeper with his distinct English accent. Most of the time, though, he was preoccupied with telling stories about the time he was stationed in India.

Vincent – I’ve forgotten his surname – spoke romantically about eating warm dal with fresh naan bread. He recalled how on balmy evenings he would sip a gin and tonic at the clubhouse. Occasionally, he would show me grainy black-and-white photos of a local girl he fell in love with. It seemed his heart and soul had never left India.

Most afternoons were spent in the corner shop. The only rules were that he had to smoke his Indian beedis outside and make sure the school kids didn’t steel sweets.

“You youngsters have no idea how difficult it was when I was young,” he complained. “All I ate was spam”.

We all laughed. He had a great sense of humour, but I never really paid attention to his point. I enjoyed a quality of living that surpassed even what my baby-boomer parents experienced.

I wish I had listened, though, because in the end there was a price to pay.

Millennials like me – anyone born after 1980 – start their working lives with a lot of debt. We have far more than any generation before us. It’s not our lack of frugality or financial incompetence that is to blame – far from it. The sad reality is that debt is a modern-day necessity.

You need to borrow if you want to keep up with the soaring cost of further education or house prices that are far higher than in previous generations. No one seems to talk about paying off their mortgage any more, and soon, many of us might have to give up hope on retiring too.

millennial weighed down by debt


The root of the problem is a divide between the rich and the poor – an age-old dilemma that we’ve never been able to completely overcome. This time, however, it’s not class divisions, education and location that drive the divide – it’s debt.

Interestingly, this is a demographic division. It pits a younger and often more heavily indebted millennial generation against an older and more asset-rich generation of baby boomers. This debt, unlike asset wealth, often compounds the wrong way, serving to expand this disparity in wealth.


a comparison of median income


It also has a cost on the older generation. The “bank of mum and dad” is now frequently used by first-time buyers. Some parents have had to postpone retirement just to help their children financially move forward with their lives.

This type of disparity is relatively new and is often misunderstood. Some of it is of our own making. For instance, in the UK, where I’m originally from, the government pushed hard to get more school leavers into further education.

Then it found it couldn’t support the influx of students into the UK’s university system, meaning that large student loans became the norm.

I understand the rationale: let’s make those that use the system, pay for the system! Yet it surely doesn’t make sense to supress the earnings power of our future higher-rate tax payers and wealth creators by loading them up with debt. This is a system that discourages ambition: earn too much and you must pay off a large loan, so why earn at all?

This is reality. There are always winners and losers. But I’m not trying to debate the rules of a zero-sum game.

What concerns me is the future hit to our economy if we do not address this issue. Historically, the younger generation has always been more optimistic than the older proportion of the population. But for the first time ever, consumer sentiment is now much stronger among those over 55 than those under 35.

It’s a trend that has been picked up by the University of Michigan, Haver Analytics and Deutsche Bank Global Research.


comparison of consumer sentiment between under 35s and over 55s


It seems millennials are suffering from depression with this latest reading. Who can blame them?

Many are concerned about their future and are actually saving a lot more than their parents did, which goes against the kind of conventional wisdom my good friend Vincent once knew.

According to a recent Bank of America survey, one in six millennials have more than $100,000 in savings. It’s difficult to believe, but it’s true – I’m one of them. In fact, the number of millennials saving more has increased over the last five consecutive years that this survey has been conducted.


survey of millennials who save money


Numerous reasons were given. Wages have failed to keep up with inflation over the past decade and many millennials have lost faith in the economy since the 2008 recession. Uncertainty is creating a new generation of supersavers. This will probably be very beneficial to the asset management and wealth management industry.

Returning to Vincent, he passed away about 17 years ago in an old people’s home in Purley in the UK. I was at university at the time.

I often wonder what he would think if he were here today in 2018.

I can imagine him saying in disgust, “These millennials have never had it so easy”.

Yet, I don’t think he would be pleased to learn that they don’t.

James Eagle

James Eagle

James is a highly experienced researcher, wordsmith and copy editor who has written numerous white papers, thought leadership pieces and other articles across the financial services industry.
James Eagle

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