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Despite a recent economic uptick, millennials are still burning through their savings or living in debt, a new study finds.
Adults under age 35 currently have a savings rate of negative 2 percent,according to Moody’s Analytics. Older generations are faring much better with a positive savings rate of about 3 percent for those age 35 to 44, 6 percent for those 45 to 54, and 13 percent for those 55 and older.
The Wall Street Journal talked to several experts who gave various reasons for the millennial generation’s inability to save for a rainy day.
The inability to save reflects the weak job market, Shai Akabas, an economist at the Bipartisan Policy Center, told WSJ. Young workers still face much higher unemployment and underemployment rates compared to the older generations.
“There’s people who really can’t save because they don’t have the means to save and that’s not a small group of people,” Akabas said. “If you’re in a $25,000-a-year job and starting a family, it’s going to be very hard to accumulate savings regardless of your consumption decisions.”
The massive growth of student loan debt is also very different from anything older generations had to take on. In 1995, borrowers under 35 had median student debt of $6,100, according to federal data. Now that figure has risen to $17,200.
Young households’ wealth has declined even more than their incomes, the Wall Street Journal found. Americans who were under 35 in 1995 earned wages that were 9 percent higher than today’s millennials after adjusting for inflation. The current median millennial has a net worth of $10,400, compared to $18,200 for Generation X.
“They are truly a vulnerable group,” Annamaria Lusardi, an economist at George Washington University who studies the implications of financially fragile young households, told WSJ. “They don’t have assets to buffer themselves against shocks, and they also have to manage debt.”
