The Millennial generation of young adults has gotten a lot of attention lately, as they’ve faced the huge challenge of coming of age in a time of extreme economic pressure and hardship. A recent study shows that all in all, they’re handling the situation fairly well, but the actions they’re taking have big implications not just for them but for the companies that are hoping to get their business both now and in the years to come.
Handling financial triage
The Pew Research Center released a report yesterday that showed how people of various ages responded to the financial crisis. The surprising conclusion was that from 2007 to 2010, those age 35 or younger did a far better job of cutting back on debt than their older counterparts.
To do so, Millennials had to face the burden of student loan debt. Indeed, the report highlighted student debt as the only type of debt to become more common during the three-year period. Yet the median balance outstanding on student loans also fell by roughly 5% to $13,140, indicating increasing awareness of what has now become a key discussion about the value of a college education compared to its cost.
More interesting, though, were the major shifts in financial behavior that Millennials made to get their debt levels down. In particular:
- Millennials were much more likely to give up ownership of a home, with the proportion of young homeowning households falling from 40% to 34%. Moreover, mortgage debt levels fell dramatically, from $150,000 to $128,000.
- How Millennials handle vehicles also had a big impact, with a decline of 7 percentage points in car ownership rates and an even bigger drop in vehicle debt. Median car loan amounts fell by $3,000 over the period to $10,000.
- Even credit card use has declined among young adults, with 39% of Millennials carrying a balance. Average amounts owed also declined nearly 20% over the period to just $1,700.
Admittedly, these prudent financial moves only undid part of the damage from earlier in the decade, as young adults got into increasingly dire money straits from 2001 to 2007 as the bubble economy encouraged profligate financial behavior. But in such a tough economic environment, it’s impressive that even with high unemployment and rampant underemployment, Millennials have made this much progress toward cleaning up their personal finances.
The future fallout
The question, though, is whether these trends will continue. If they do, then they’ll have a lasting impact on several industries that make up a big part of the U.S. economy.