The Millennial Generation Has Negative Savings

Adam Taggart
By Adam Taggart on Mon, Nov 17, 2014 - 11:40pm

As I went into in detail in my earlier article, Americans Can't Afford The Future, the millennial age group (adults under 35) is in serious risk of becoming a 'lost generation'. 

Due to a sluggish economy in which fewer job openings are available to them due to older workers who won't (read: can't) retire -- as well as outsourcing, downsizing, and automation -- millennials aren't developing the expertise, or even the opportunity, necessary to capital formation.

So, it's little surprise to learn that the millennial generation has a negative savings rate:

Millennials aren't saving a dime (CNN Money)

Cash-strapped millennials are slipping into the red.

People younger than 35 are not saving money, according to a study by Moody's Analytics. In fact, their savings rate has dipped to negative 2%, meaning that they're spending more than they have. They're the only age group that has a negative savings rate.

In contrast, workers between the ages of 35 and 44 have a positive savings rate of about 3%.

Millennials are struggling in spite of an improving job market, with an unemployment rate that dipped to 5.8% in October as the U.S. economy added 214,000 jobs.

But wages have remained stagnant, barely budging since the 1990s. So even with a low unemployment rate, millennials are having a tough time making ends meet. Many have taken on hefty student debt to attain the skills they need to be competitive in the work force.

Things were a lot worse just a few years ago. Millennials had a negative savings rate from 2004 to 2009, bottoming out in 2007 with a deficit of about 15%, according to Moody's.

They recovered in 2009 and managed to stay above water until 2012, when they slipped back into the red.

Related: First-time homebuyers abandoning the housing market

Many college-educated millennials are able to find professional jobs, but they have limited upward mobility according to Babson College finance professor Dr. John Edmunds.

"The millennials are waiting for those above them to either retire or die," he said. "But the baby boomers are not going to give it up that easily."

We are handicapping our future by squandering its development opportunities, while simultaneously burying it under crushing loans and excessively high costs of living. When the time comes -- as indeed it will -- to pass on the torch of productivity, it should come as no surprise when there's no hand present or capable of receiving it. And the fault will be ours, not theirs.

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21 Comments

Thetallestmanonearth's picture
Thetallestmanonearth
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I don't know if this stat is

I don't know if this stat is accurate or not, but I read somewhere that ~90% of the oil ever used has been used since the time JFK was assassinated. Baby boomers thus were born into a time when a wide variety of historically useless skills became marketable in an increasingly complex society.  As we enter the next stage of human history the millennial will be handed the reigns of a society that no longer operates the way we were taught it's supposed to.  Skills that we have trained for (computer programing, econ, internet advertising, aviation, construction, chemistry etc) will still be needed, but the opportunities and the rewards will both have entered the territory of diminishing returns.  Maybe they already have and that's why the boomers are still working past retirement age, trying to scoop the last few spoonfuls of soup out of a bowl with a hole in the bottom.  The transference of opportunity in such a complex society doesn't flow from parent to child, but from retiring parent, to open job market, to whoever is most qualified and least expensive.  The sacrifice needed to make room for millennials in a shrinking market doesn't guarantee a job for ones kids, but if you keep working maybe you can help them make the bills.  A market is designed to remove human ethical barriers to economic expansion by making all transactions and career decisions as impersonal as possible, so we can't even blame it on the boomers, they're stuck in the same system.

The best strategy I see for my generation is to do everything we can to avoid the debt trap. Capitalize on the liberalization of information that is available with the internet and educate ourselves.  Learn about what is happening in the world, but more importantly, learn some useful skills.  The best are those that are marketable now as an entrepreneur and add resiliency in an uncertain future.  Anything related to production of staples (food, soap, clothing, shelter, clean water, off grid energy, basic tools etc) is a good bet.  We have to be prepared for a less prosperous future than our parents lived and still be happy people.

cmartenson's picture
cmartenson
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Great explanation

The transference of opportunity in such a complex society doesn't flow from parent to child, but from retiring parent, to open job market, to whoever is most qualified and least expensive.  [/quote]

I thumb-ed up the whole comment, but I want to draw out the one part I've quoted because I think it's a neat and tidy explanation for how declining net energy plays out at the job level.

As we slip down the energy cliff, we cannot know exactly what each culture will decide to jettison as 'unnecessary' activities.  Some decided to cut down trees and erect giant stones right to the end.  A different culture would have chosen some other activity.

The question to ask is, what are our equivalents of giant stones?  What will *not* disappear as the green area shrinks?

My best guess is that we'll cling to technology as the last things to erect before w succumb to reality.  Maybe that's just talking my own book, as they say on Wall Street, because that would imply the internet will be salvaged/preserved at any and every cost.

 

robie robinson's picture
robie robinson
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as i understand it

instead of buying another tractor, i should buy a broke team of horses and be sure one of them, at least, is a mare.

 

HughK's picture
HughK
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cmartenson wrote:The
cmartenson wrote:

The question to ask is, what are our equivalents of giant stones?  What will *not* disappear as the green area shrinks?

Very interesting conversation, and a salient reminder of the Easter Islanders.

I would guess that in an age of declining net energy, some of the things that will consume as much or more of world GDP (as a percentage) include the centralized hard-path and top-down priorities such as warfare, the security and prison industries and industrial agriculture

And on the more decentralized, bottom-up, soft path we will probably see an increase in micro energy projects of many types (e.g. home solar hot water heating, small PV systems), more market gardens and an increase in subsistence agriculture, and also possibly more spending from the bottom up on security as well.

I wonder what things will disappear first...I guess it will be the things with the greatest price elasticity of demand...the things people are most wiling to do without.

I know for me, as soon as I realized how unsustainable things probably were, I reduced the amount of times I would go to a restaurant.  I think that restaurants are pretty vulnerable to recessions in general.

So, for starters, I would guess that the restaurant industry will suffer a lot when net energy really starts to fall, unless they can produce food for less total energy than households can.  Maybe big cafeterias with low quality food and/or street vendors with simple dishes served from trailers, using very little energy/time/labor per calorie will become more common, but what we in America would call medium-quality or fancy restaurants will be more likely to go out of business.

pyranablade's picture
pyranablade
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Sprawl and happy motoring

What are our large stones?

I think that Americans are clinging to private transportation and the whole culture of cars, trucks and suburbia. (Have you read The Long Emergency by Kunstler?)

In the "purple" state of Wisconsin, Scott Walker originally got elected on the platform that he would return money earmarked for high-speed rail back to the federal government. 

The same people that insist that we don't need trains or buses are also the same ones who will be bitterly complaining when the price of gasoline goes back up again.

In fact, they are probably the same ones who recently purchased SUVs. They are not a fringe group. but rather the ideal consumers that advertisers and the mass media loves.    

macro2682's picture
macro2682
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What's left

How long does this realization/adjustment period typically take?  Do we have data from previous societies? I suspect given the specialization and military positioning, it could take an entire generation or more.  Maybe several generations?  

I would probably advise Robie against buying those horses..

DennisC's picture
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Our "Stones"

For some reason, this came to mind: http://carhenge.com/

Perhaps hundreds of years from now, when the remnants of our continent's civilization are wandering the great plains, gathering "nuts and berries", they will stumble upon this great monument and use it for whatever rituals are in vogue at the time.

(the site took long to load, at least it did for me)

HughK's picture
HughK
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Motorcycles are the new station wagons
pyranablade wrote:

I think that Americans are clinging to private transportation and the whole culture of cars, trucks and suburbia. (Have you read The Long Emergency by Kunstler?)

Yes, I agree that we'll hang on to our cars for longer than is prudent, but economic pressure will probably still force some change in terms of transportation.

As has been noted here before, another change we are likely to see in the developed world is a big increase in motorcycles and scooters. Motorcycles are already huge in the developing world.  

In the Philippines, a motorcycle can often be the family car, at least for those families that can afford one. While Ralph Nader may not be very impressed with the safety statistics, they're certainly fuel efficient.

There are also what the Filipinos call tricycles, which are mostly used as taxi cabs, although you can also pay someone 10 pesos* (less than 25 cents) to take you up to a kilometer in a 100% human powered pedicab.

Barring a Seneca cliff scenario, I would be happy to make a wager that there will be more motorcycle miles driven per capita in the US in 10-20 years than there are now, even if gas gets a lot more expensive.  

One growth business might be motorcycle dealers & repair shops.

*Here's a picture of pedicabs in the Philippines.  The 25 cents per kilometer price is the price in a small provincial capital.  It would be higher in bigger cities such as Cebu and certainly higher in Manila.

Bankers Slave's picture
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I would imagine that

the Vatican with its vast documentation vaults of over 1000 years of history would have the data that would give us an insight to what we can expect in the future, when reflecting upon previous societies!

You never hear them coming out against lying war mongering psychopaths, so don't hold your breath for any Vatican honesty for humanity any time soon! 

I am sure there will be an ark, coming along sometime soon!surprise

 

aggrivated's picture
aggrivated
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Seneca effect

I just got through reading the last few (5 or 6) of Gail Tverberg blog posts on her site. I highly recommend them.  This is my simplistic summary---Oil is holding up the world of debt that we keep using to 'stimulate' our economic activity.  Some of that economic activity is exploring for and bringing up more oil.  Since the current world economy has been staggering under the current load of debt the price of oil has dropped.  Price is dependent on what people will pay for it. (One of the jewels of Austrian economics). Economic conditions have to support a price of oil that pays for more exploration. If not, then we have hit the Seneca cliff.  What's at the bottom of the cliff will be a much different terrain that what we have been walking on at the top.

Wear your parachute.

 

jgritter's picture
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Buy the horses

If/when the supply chains begin to slow/stop the usefulness of a tractor will be limited by the availability of fuel and spare parts.  Horses have the advantage of  being able to provide traction while running on widely available and readily renewable biofuel, they are largely self maintaining, self replicating, produce milk and fertilizer, are warm and friendly, will listen nonjudgementally to your problems, and in the due coarse of events or in a tight pinch, you can eat them.  If your goal is sustainable, potentially multi generationapl, agra business, with lower yields but lower inputs, then go with draft animals.  If your goal is to strip mine top soils for maximum profit, go for tractors.

How fast can things change?  October 5, 1789 King Louis the XVI woke up king of the French universe and the center of political power as his forbears had for centuries.  A bunch of angry women decided that they had ,no shit, finally had enough, and by the end of the day he was a politically irrelevant hostage who was probably lucky to be alive.  The power vacuum resulted in decades of famine and warfare.  Imagine 10's of thousands of people arriving on The Mall in Washington for some event.  For whatever reason some percentage of then of them decide that, no shit, today is the day to go over the White House fence.  Things get bad when the people with guns refuse to shoot into the crowd, worse if they do shoot into the crowd, or very bad if the crowd shoots back.  At the end of one day the Federal Government is suddenly seen as irrelevant or dangerous by large parts of the country, state and local governments get thrust into a power vacuum they are unprepared to fill and things begin to get very bumpy indeed.

One day Julius Caesar crossed the Rubicon, one day a bunch of civilians got shot on Lexington common, one day any number of people have stormed any number of palaces in any number of cities at any number of times through history.

Sorry, that turned into a bit of a rant, but things may stumble along for years, or crash within hours, so very hard to know.

Hope for the best, prep for the worse,

John G.

robie robinson's picture
robie robinson
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thanks John G.

We've always lived as though "that day" had come. it is truly a satisfying life.

Wildlife Tracker's picture
Wildlife Tracker
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Does debt matter?It feels

Does debt matter?

It feels like it does because it can have a tremendous impact on your life TODAY. The question is whether or not it will have an impact on your life tomorrow.

Every organism in the world needs to grow and constantly participate in order to be healthy and be an effective member of the ecosystem. Debt represents negative growth and I think that is why humans are so controlled by it.

The challenge is mentally separating the concept of debt with your ability to grow and participate in society because this is the most important thing. The reality is that everybody is in debt.  Not just us millennials. The median net worth of a baby-boomer in the US is around $175k (which includes household equity) and the median house in the US is worth over $200k.

On top of that, the labor market is a cup that is overflowing. The millennials just happen to be the fresh water trying to fit in. On the other side, once you are in the cup it’s also a struggle to stay in because the fresh water trying to enter is a powerful flushing force.

Finding purpose outside of the cup is the challenge.

One of my recent research projects was identifying the most comorbid (multiple chronic conditions identified) individuals by geographical region in the US. 12 chronic conditions were sampled and included asthma, high-blood pressure, cancer, depression, etc. The only statistically common attribute among highly comorbid individuals was that they were unemployed. This is an important discovery because work has been shown to provide individuals with daily activity, social interaction, and identity. All of which provide health promotion.

Individuals who were employed averaged in fewer chronic conditions than individuals who have been out of work for any length of time regardless of age. Retirement also suggests having more chronic conditions than being employed regardless of age.

 

Source: Combined 2011 and 2012 National BRFSS Datasets (approximately 1 million people sampled)

 

The point of me posting this was that, no matter what happens, don’t lose your purpose to live. Always find a way to participate and grow.

Debt is funny form of accounting that does not limit your ability to participate in society and ultimately will not define your value when the water cup gets smaller.

ResilientMan's picture
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The voting demographics are

The voting demographics are also against the Millennials. Short sighted governments, will keep the mass voting block of older people happier in order to get elected!

ResilientMan.com

 

robie robinson's picture
robie robinson
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aggrivated's picture
aggrivated
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reply to ResilientMan

Welcome!

Your comment on the voting block holds true for many groups:  baby boomers (old folks), big agra, select minorities, big corporations, etc.  Political influence (by voting or buying)  is primarily about rooting around for a teat to get some of Autie Sama's milk $$$'s.  To complete the analogy, one might comment on Auntie Sama's poor health and the very likely probability that her $$$'s may dry up soon,  So, I would hope that Millennials and others who want to survive look to resilience--  I really do like your name! 

DisappearingCulture's picture
DisappearingCulture
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Reply to Thetallestmanonearth coment

It sounds like you are a millennial. If so I salute how astute you are, and your great commentary.

This from a 59 year old that has no plans to retire.

Short of health reasons I won't have to; I own my own business. Someone has to pay the taxes to support TPTB.

Thetallestmanonearth's picture
Thetallestmanonearth
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Thanks DisappearingCulture.  

Thanks DisappearingCulture.   I am a millennial; born in 85. Much of my education on these topics have come from discussions on this site.  I so appreciate having a bastion of sanity that I can return to and good people I will probably never meet to bounce ideas around with..  So much of my daily interaction is with people who refuse to lift up the rug and figure out how this house that supports us is built....it can be exhausting.  I know it is for a lot of us.

I think owning your own business is the way to go....I'm curious what sorts of businesses people on PP consider to be more resilient given what we see coming.  I'm still wearing the golden handcuffs and working for someone else, but it's a small company that let's me work from home so there are a lot of benefits for now.  I have been toying with the idea of starting a small edible perennial nursery as a side venture, but I am taking that project slow.  Any other ideas from the community that would be well suited to the changes brought on by the three E's?  It seems like anything that can be produced with locally available resources that can be sold now and perhaps used for barter later that doesn't require taking on a line of credit has the potential to be sustainable.

By the way, I like your screen name. A subtle, but important observation.

Doug's picture
Doug
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tallest

Like you, we have planted a small "forest garden" that will take some time to mature into a commercially viable system. In the meantime we have found that chickens provide a sustainable source of Income and food that is scalable. We are discovering that there is more demand for eggs and meat birds than we can currently supply.

A secondary benefit for us is the bedding straw that serves well as mulch for the fruit trees. As mulch the manure dilutes and composts enough that plants don't get burned and benefit from the nutrients.

Our current challenge is scaling our annual garden to commercially viable. Saving seeds, having a reliable source of cow manure and creating raised beds are working so far, but we have a long way to go. In the meantime our own larder is well stocked.

Doug

DisappearingCulture's picture
DisappearingCulture
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Millenials

I have a son born in 1982; a daughter in 1988. My son has been professionally diagnosed [as a HCP myself I made sure it was a top PhD clinical psychologist] as ADD + synethesia. He's a bit spacey; doing the best he can for now. It's be spacey or be on stimulant drugs. Running and weight lifting helps a lot. A brilliantly creative and gifted artist, I hope he finds his niche. For now he has an Obamacare-casued 29 hour per week job. Any unusual expense and we have to rescue him financially, but to his credit he will suffer before he asks for help. My daughter took some time off from sanity and ran away after high school [delaying education for three years]. But she recently graduated from Ga. Tech with a 3.80 and is thoroughly bilingual. She will get a good job [unlike most college grads these days]. That said I highly recommend HS grads to very carefully consider whether it is worth it to go to college [see writings by Charles Hugh Smith on this topic].

"Much of my education on these topics have come from discussions on this site.  I so appreciate having a bastion of sanity that I can return to and good people I will probably never meet to bounce ideas around with.."

You are to be commended in searching for the truth. In my office I have a brilliant young lady age 23. But topics like these are not something she wants to read. It's not fun or entertaining.

Thetallestmanonearth's picture
Thetallestmanonearth
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re: Doug

Interested to hear more about the chickens.  We have 16 currently and haven't tried selling eggs yet. We give away about five dozen a week.  I know our "customers" would be happy to pay, but we haven't wanted to grow the enterprise and for the small amount that we produce we've preferred the social capital we get by having friends seek us out for groceries.  We have the space, so we may decide to go bigger and see if we can generate a side stream of income at some point in the future.

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