Tale of Two Millennials: Those That Delay Adulthood and Those With Kids of Their Own

Editors' pick: Originally published Nov. 22.

Millennials, that cohort born between 1982 and 1998, are a huge generation--bigger than Boomers according to the Pew Research Center and the U.S. Census Bureau. They've been defined by the Great Recession and the aftershocks of the lingering debt that came with it. The pay-off could last a lifetime.

"You can't really talk about or understand this generation without talking about how much it collectively owes," said Dan Kadlec, founder of Right About Money, a Web-based platform that promotes financial literacy. "They not only saw friends suffer during the Great Recession but watched their parents lose their homes, their savings and their assets and saw first-hand a dissolving social safety net." With student loan debt at $1.4 trillion, he added, "This affects the way they think about money, but in ways that are not well-known."

Two distinct Millennial segments have begun to emerge: those who worry about their student loans at the younger end and those older Millennials who are just as worried about how their young kids will pay off their own loans when they go to college.

At the Society of American Business Editors and Writers (SABEW) September conference in New York, Chandra Turner, executive editor of Parents magazine, who, like Kadlec, is a tad too old to be a Millennial, said she's encountered Millinnials with kids through her publication. Rebecca Liebman, CEO and co-founder of LearnLux, finds them in dorm rooms, like the one where she started her company.

"I went to school to study environmental science and had no interest in finance," said Liebman, who graduated from Clark University in 2012. "But my dad got laid off when I was a junior and that lead me to learn about finance," which led to the start-up that became LearnLux. "When I was a senior, I ran the company out of my dorm room. When I graduated, everybody told me to get a real job. I didn't." Boston-based LearnLux is now a technology provider that facilitates financial decision-making for people under 30. "This is all I think about all day," she said.

Parents Magazine's Turner notes that married-with-kids Millennials perform a debt triage--not only paying her own living expenses but those of their kids. "Once they start having children and have responsibility for another human being, they start to have this triage issue--what debt do I pay first. I have childcare, I have a mortgage payment or rent--but I've also got my student loan. When the choice is between child care or the student loan--what kind of choice is that? In figuring out what works, something's got to give."

Millennials don't save in the traditional sense, where you open up a saving account at a bank. They're not alone, as many are turned off by bank interest rates that pay about 1%. Yet not saving keeps Millennials up at night, according to a poll done earlier this year by Parents magazine and the Harris Organization. "There are a lot of things that are stopping them," said Turner, mainly "their college loans and their own debt. They feel the obligation to pay their bills. Many are living paycheck to paycheck." It's not a time to save money.

Turner sought to explode the myth of Milliennials living in their parents' basement. The Parents/Harris study found Millennials are spending on average 43% of their household income on housing. During the halcyon days of a bygone era, people would ideally spend 25% of their income on rent or a mortgage payment.

Under these circumstances, student loan defaults are understandable, especially among Millennials with kids. Turner cited the study stating, "34% of Millennials say if they knew in advance what the cost of in raising a kid--$300,000 on average by the time they're 18--they would have waited longer. Waiting longer was already a trend. Almost half are going to wait longer to have another kid so they can get their finances under control."

Turner noted that the American Dream is being redefined, particularly among childless Millennials.

"The goal used to be to buy property," she said. "Now the goal is mobility, the ability to travel, and that seems not only more attainable but safer, as Millennials have watched their parents take on mortgages, then borrow against equity on property that lost value during the Great Recession." Those that do buy, she said, "are looking for smaller homes instead of McMansions that were popular when I was growing up. The financial crisis, she said, was putting a premium on home affordability.

An emerging life phase--called emerging adulthood--surfaced during the last decade, where people eschew the trappings of adulthood for as long as they can. That concept is taking hold.

"It's going mainstream," said Liebman. "Everything is moving back. Debt and credit affects every other decision in your life. From our research, the most important metric will be: did you graduate from college with debt? If you did, every other financial decision gets pushed back."

According to Bankrate, 67% of Millennials don't have credit cards. "That's a crazy number," said Liebman. "But when people graduate with debt, they don't want to take on more. We are primed to be the best saving generation--yet we don't really save. Anything we save is going to pay off debt. The longer you wait to get a credit card, the worse your credit's going to be."

So has paying off debt has become the new saving? Not if Millennials work for a company with a 401(k) plan, although that's no longer a gimme in today's job market. For those that do start their careers in a job with a 401(k), Kadlec said that the average age a Millennial starts one of these retirement savings accounts is 22 or 23. For Baby Boomers it was 35. "They're ahead of the game in certain ways if they're starting early," he said. The countervailing trend is found in the gig economy, where you work two jobs with no benefits. Rather than being a transitory feature of the Great Recession, it has become a permanent part of the economic landscape.

Turner noted that Parents/Harris research found that 59% of Millennial parents have a retirement account they contribute to regularly. But the bucks stop there. Only 40% are savings for their kids college. They want to pay off their own debt first.

Liebman took the financial press to task for not being able to communicate to consumers looking for information about finance. But that wraps back to a lack of financial literacy, something that is best obtained before college.

"A lot of the jargon used by the financial press includes terms that people don't click on," she said. "People weren't taught financial education and are embarrassed that this is important information they don't know," so they avoid the issue entirely. She said a better way must be found to reach them and make this information more accessible.

While more financial education is needed and that it should be delivered by government agencies through the school system, Liebman did not view the government as a source of solutions in general.

"I think the biggest changes will come through financial technology companies, not the political system," said Liebman, who made her remarks before the election. Business lets you make changes so much faster. "If you look at the fintech companies all over the country, they're making products that help the consumer more than a bank can or more than the government can," Liebman said. "I think fintech companies will be changing the space much faster."

More from Debt Management

How to Calculate Your Net Worth and Pin Down Your Financial Health

How to Calculate Your Net Worth and Pin Down Your Financial Health

Five Signs You're Getting a Raw Deal From Your Financial Adviser

Five Signs You're Getting a Raw Deal From Your Financial Adviser

How to Protect Yourself and Your Family From Long-Term Care Insurance Scams

How to Protect Yourself and Your Family From Long-Term Care Insurance Scams

Why Property & Casualty Insurance Should Not Be Optional

Why Property & Casualty Insurance Should Not Be Optional

Bouncing Back From Bankruptcy - Sooner Than You Think

Bouncing Back From Bankruptcy - Sooner Than You Think