- Only 19% of millennials and Gen Z define financial success as being rich, according to a recent Merrill Lynch Wealth Management report – most define it as being debt-free.
- According to the report, early-adult households collectively hold nearly $US2 trillion of debt, mainly credit-card debt and student-loan debt.
- Student-loan debt has caused them to delay homeownership and parenthood and put them behind in retirement savings.
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Some people might equate financial success with how rich they are, but that’s not the case with most millennials and Gen Z.
According to a recent report by Merrill Lynch Wealth Management, which surveyed more than 2,700 Americans ages 18 to 34, only 19% of respondents defined financial success as being rich – 60% defined it as being debt-free.
“Freedom from debt seems a low bar of accomplishment, yet it’s an elusive goal for many early adults,” the report said.
According to the report, 81% of early-adult households carry a collective debt of nearly $US2 trillion. The debt includes car loans and mortgages but is mainly made up of student-loan debt and credit-card debt. Those who carry the latter have an average balance of $US3,700, and more than half said they’re struggling to pay it off.
Meanwhile, college tuition has more than doubled since the 1980s. As a result, student-loan debt has reached record levels – the national student-debt total is more than $US1.5 trillion, and the average student-loan debt per graduating student in 2018 who took out loans is $US29,800, according to Student Loan Hero.
The financial repercussions of this are hitting hard. According to the report, 36% of college graduates paying off loans said the debt wasn’t worth it. An INSIDER and Morning Consult survey found a similar sentiment – nearly half of indebted millennial respondents said college wasn’t worth taking out student loans.
“Student debt is having major ripple effects on early adults’ futures, financially and personally,” the report said. “Four-hundred-thousand early adults who would have purchased a home a decade ago have not been able to afford one due to student debt, and today’s early adults take finances into greater consideration in deciding whether and when to have a child than those in past generations. The ripple even reaches retirement years – indebted graduates are contributing only about half the amount to their 401(k)s compared to those without debt.”
Retirement is a particular problem for older millennials, who graduated from college and entered the workforce during the Great Recession. A tough job market and wage stagnation made it increasingly difficult to pay off student-loan debt, Jason Dorsey, a consultant, a researcher of millennials, and the president of the Center for Generational Kinetics,previously told Business Insider.
Consequently, they weren’t able to accumulate the amount of wealth they hoped to. “Older millennials are often realising they’re going to have to play catch-up with their finances if they want to ever be able to retire, but some of them have already decided that they likely will not ever be able to afford to retire,” Dorsey said.
While Richard Vedder, an author and distinguished professor emeritus of economics at Ohio University, previously told Business Insider that the rising cost of college has made a degree less advantageous than it was 10 years ago, the report said that a bachelor’s degree is estimated to help the average person add $US1 million to their lifetime earnings.
What now remains to be seen is just how much of that money will be spent paying off the debt that helped them obtain the degree.