Optimism about the success of the next generation is falling
On paper, these young adults are ready to be alone.
The reality of financial independence is quite different. And if you ask, most Americans would say the outlook for the next generation is bleak.
Only 42% of American adults think today’s young people are very or somewhat likely to be better off economically than their parents, according to a new Gallup poll. That’s down 18 percentage points since June 2019, Gallup noted.
“Americans are the least optimistic they have had at any time in nearly three decades about young people’s chances of having greater material success in life than their parents,” Gallup said in releasing its data. .
The lack of optimism is understandable.
Inflation is at its highest for 40 years. There are fears that the economy is heading into a recession. The pandemic continues to cause supply chain issues, driving up prices for food, clothing and other consumer goods. Housing prices are outrageous in many big cities where young adults want to live. The Federal Reserve’s fight against inflation sent mortgage rates to their highest level in 20 years.
Because young adults tend to be lower on the pay scale, the high cost of living can have outsized consequences. Monthly rents in many areas can eat up half or more of their take home pay. Inflation only made things worse.
In 2020, 23% of American renters spent at least 50% of their income on housing, according to the Census Bureau.
The universal basic income has been tested several times. That works. Will America ever accept it?
My husband and I encouraged our children to choose the financial security of their childhood home over the high cost of independent living in the Washington metro area. We do not charge rent in exchange for their saving more than half of their annual income.
It is an economically strategic plan that allows them contribute to retirement plans, build healthy emergency funds and save for a down payment for their own home.
If all goes as we planned, our kids will be better off at launch than we were in our twenties.
That’s what most parents want, isn’t it? For their children to have a better standard of living, one with a decent cushion of money when life comes around.
Leave adult children to fend for themselves? It’s outdated in today’s economy.
When it comes to saving for the future, paying for college, buying a home or finding a job, most Americans say young adults have it harder than their parents’ generation. according to a Pew Research Center survey published this year.
We know that home ownership contributes enormously to household wealth.
Looking at data from over 960,000 users of its platform, LendingTree found that the average the down payment based on a 30-year fixed-rate mortgage on a home in the nation’s 50 largest metropolitan areas exceeded $62,000. Of course, deposits may vary by location. But none of the metro areas had an average down payment below $38,000, according to LendingTree’s analysis.
The Pew survey found that 84% of adults under 30 say buying a home is harder for young adults today. Among people aged 30 to 49, 72% say buying a home and paying for college is harder for young adults today, according to the Pew survey.
This is why multigenerational living makes economic sense.
A quarter of American adults aged 25 to 34 lived in such households in 2021, up from just 9% in 1971, according to another Pew survey.
“Multigenerational households can have financial advantages,” Pew said in a July report. “Pooling financial resources means that family helps in difficult times.”
In 2021, the share of people experiencing poverty in the previous year was lower in multigenerational households for white, black and Hispanic Americans, Pew reported.
Mortgage rates top 7% as Fed scrambles to slow economy
Roommates can give young adults a chance to develop the vital habit of saving early. Being able to save early can make a huge difference in their ability to build a retirement safety net. If young adults are struggling to make ends meet, they won’t save because they can’t afford to.
According to census data released last summer, only about half of millennials aged 24 to 39 have at least one type of retirement account. The earlier young adults start investing, the better the chances they must accumulate significant retirement savings.
Youth: Go home. Or stay home, if you can. Parents, grandparents, aunts and uncles: welcome them, if you can.
Multigenerational living is a response to pessimism that the next generation will do no better. Done well, with goals, checks and balances, it’s not about pampering adults. It’s about cost reduction and the impact that can have on building wealth for their future.