Many young Americans are living check to check, struggling to make ends meet, even those who are employed. Paying down debt and covering essential items leaves them with little to no money to save, putting a big question mark on their future. This is an unheard of situation, as past generations tended to be each wealthier than the previous one; today though, people in their 20’s and 30’s have built less wealth than their parents did at the same age. The Urban Institute took a closer look at the lives of young adults and the circumstances that have led them to forsake saving.
The Youth Of The Nation
According to the study, the crash of both the stock and the housing market directly influenced the current financial situation of young American adults. Moreover, the median income has declined since 1999’s peak, meaning that salaries are often not enough to keep up with expenses, especially debt, such as credit card debt, but in particular student loan debt. As it turns out, having gotten a college education is part of the reason that these youngsters have to scratch and claw, precisely because a degree does not guarantee proper employment. Even those who do have a job can owe as much as half their monthly take home pay in credit card and student loan debt.
The Damage Done
The worst part is that irretrievable damage may have been done, so much so that despite having the entire lives ahead of them, these individuals may never be able to make up for it. For example, if a person only gets around to buying a house when they’re 40 instead of 30, the result might be a $42,000 loss in home equity by the time they’re 60, taking into account wealth accumulation trends over the past few decades. Furthermore, as wealth compounds over time, a dollar saved today is worth more than a dollar saved ten years from now, meaning that the longer they take to start putting away money to save, the less it will be worth.
The labor market has not been kind either; the unemployment rate for people between the ages of 25 and 34 is 7,8%. All of this combines for one big, looming black cloud overhead, mainly when it comes to the retirement picture in a world where private sector fixed pensions have largely faded. The Urban Institute says that the government needs to take measure now to help the youth in America build assets, before they become too dependent.