Millennials often get a bad rap. Among their debt, their job hopping, and their so-called entitlement, they’ve been widely criticized. But as it turns out, there may be a reason for that generation’s financial shortcomings.
Think increasing college loan debt, lingering effects of the Great Recession, higher housing costs, and an overly competitive job market, just to name a few.
Here’s a rundown of the average Millennial's financial situation, how much the average Millennial makes, and how they stack up to other generations.
Millennials are the largest living generation (even surpassing Baby Boomers), with a population of 72.1 million in 2010, according to Pew Research. Pew recognizes Millennials as those who were born between 1981 and 1996.
Millennials are a unique generation in that they grew up during a time of rapid-fire technology. Social media, smartphones, and unfettered access to the internet are all givens for that generation.
There’s a big difference between the younger end of the age group (those who grew up with social media and smartphones) and the older Millennial set, also called "Old Millennials."
When it comes to earning power, the average Millennial's annual salary is $47,034 according to the U.S. Census Bureau's most recent statistics. Still, Pew Research found that more Millennial households are in poverty than any other generation and that Millennials accounted for most of the nation’s renters.
Another survey by the U.S. Census Bureau, the 2015 American Community Survey (ACS), found that income stayed relatively flat between the ages of 25 and 35, which could account for Millennials’ struggling finances. In fact, Millennials’ starting salaries are approximately 20 percent less than what Baby Boomers made at that age (in real terms, i.e., adjusted for inflation). As far as net worth, the average Millennial has about $8,000.
Student loan debt is another major factor. Millennials have 300% more student loan debt than their parents did, are half as likely to own a home than a young adult was in 1975, and will likely not be able to retire until age 75. Rising student loan debt has also played a role in declining homeownership among the demographic.
While it’s true that Millennials earn less than their predecessors, they take finances seriously, making saving for retirement and investing two priorities. They also have big emergency funds, with the average Millennial rainy day fund able to cover up to six months of living expenses.
The charts below illustrate that, while Millennials dominate the full-time workforce today, they're making significantly less than their predecessors.
How Millennials Can Improve Their Finances
There are several factors stacked against the average Millennial, but there are a few things they can do to help build net worth.
Pay off debt as quickly as possible, or take on as little debt as possible. While it may seem impossible to obtain a college degree without student loan debt (the average Millennial has more than $30,000 in student loan debt, after all), offsetting that debt by working, paying student loans while still in college to avoid interest, avoiding consumer debt, and living well below one’s means after graduation are all viable options to slash debt, thus adding cash to invest and build net worth.
If student loans are the main issue, setting up a payment plan based on current income is another option, as is applying for student loan forgiveness, which is available in many fields, like public service.
If your student loan debt is forgiven, you won't owe income taxes on the forgiven amount. The American Rescue Plan made all student loan forgiveness tax free through December 31, 2025.
Establishing a realistic budget and sticking to it is another way Millennials can boost their financial outlook. A few tips: Be sure the budget is realistic, based on living expenses and spending style; make small lifestyle changes to make the numbers work; and don’t forget to set financial goals, like buying a home or investing.
Speaking of investing, it’s one of the best things Millennials can do to improve their finances and build net worth.
Investing early is key, and it will allow for greater earnings in the future, thanks to compounding.
Since Millennials might not be able to rely on Social Security like the generations before them, planning for retirement is also key, though studies have shown that Millennials are great at saving for retirement. A 401(k), an IRA, or a Roth IRA are all good options.
While Millennials might not earn as much as the generations before them and often have more student loan debt, there are a few action items they can take to ensure a more financially secure future.
Frequently Asked Questions (FAQs)
How do Millennials compare to other generations when it comes to spending?
Baby Boomers purchased about 15.1 million more "consumer units" than Millennials did in 2015 before the economic upheaval of the pandemic, according to a comprehensive and experimental study published by the U.S. Bureau of Labor Statistics. Millennials spent less than Boomers on alcoholic beverages, apparel, entertainment, and their pets.
How much of the U.S. workforce is made up of Millennials?
Millennials' (age 35 through 44) participation in the labor force is expected to increase by almost 4.5 million between 2019 and 2029. It's the largest increase for any age group, followed by Baby Boomers at about 4 million.