Millennials & Gen-Z are Poorer Than Ever (Here’s Why)

Summary

This video explores the financial struggles faced by younger generations compared to Baby Boomers, focusing on rising home prices, increased student debt, and stagnant wages. The narrator examines the home-to-price income ratio, inflation trends, and the cost of living, illustrating how these factors impact Millennials and Gen Z. They also discuss the impact of delayed life milestones like marriage and homeownership, along with the financial burden of car payments and student loans. Offering practical advice on budgeting, saving, and increasing income, the video suggests ways younger generations can overcome these financial challenges.

Takeaways

• 😀 Younger generations have 86% less purchasing power than Baby Boomers did at the same age, highlighting a significant economic shift.
• 😀 The average millennial home price in 2022 was $433,000, and the median income was $70,000, meaning it would take over six years of income to buy a home outright.
• 😀 In comparison, Baby Boomers in 1988 could buy a home for four times their annual income, showing a stark contrast in home affordability over time.
• 😀 The home price-to-income ratio in the US is currently worse than during the housing bubble of 2006-2008, making home ownership increasingly difficult for younger generations.
• 😀 In the UK, the home price-to-income ratio has consistently been over 7 for the past decade, and recently exceeded 9, indicating even more severe housing challenges than in the US.
• 😀 While inflation has steadily increased since 1970, home prices have outpaced inflation by a significant margin, contributing to the unaffordability of housing.
• 😀 The average American car payment is now $716 per month, and auto loan debt is at an all-time high, further straining younger generations financially.
• 😀 Millennials and Gen Z are saddled with more student loan debt, which has tripled since the 1990s, making it more challenging for them to build wealth and secure home ownership.
• 😀 College degrees are becoming less valuable as tuition costs continue to rise and competition for jobs increases, especially as more people graduate with degrees.
• 😀 Younger generations often struggle with job opportunities, as entry-level positions now require experience, which is a significant hurdle for fresh graduates.

Q & A

Why do younger generations have less purchasing power compared to Baby Boomers?

Younger generations have 86% less purchasing power than Baby Boomers due to the rising cost of living, including housing, cars, education, and overall inflation. These factors make it harder for younger people to afford the same lifestyle and assets that Boomers could attain at a similar age.

How does the home-to-price-income ratio illustrate the affordability of housing?

The home-to-price-income ratio compares the median home price to the median household income. A higher ratio means it takes a larger portion of someone's income to afford a home. For instance, in 1988, the ratio for Baby Boomers was around 4, meaning it would take about 4 years of income to buy a home. In contrast, today's ratio has risen to over 7, indicating a much larger financial burden for younger generations.

What was the home-to-price-income ratio for Baby Boomers in 1988, and why is it significant?

In 1988, Baby Boomers had a home-to-price-income ratio of 4, meaning it would take 4 years of their median income to buy the median home. This is significant because it highlights the relative affordability of homes during that era compared to the much higher ratios seen today, making it easier for Boomers to afford homes.

How do home prices in the United Kingdom compare to the United States?

Home prices in the United Kingdom have been significantly higher than in the United States, with home price-to-income ratios consistently above 7 for the past decade and recently over 9. This shows that housing affordability is an even bigger issue in the UK compared to the US.

Why are home prices outpacing inflation, and what are the main contributing factors?

Home prices have been rising faster than inflation due to factors like population growth, limited housing supply, and higher demand. The Boomers didn't face as much competition when they were buying homes, while younger generations are dealing with increased demand and a larger population. Additionally, lower interest rates in the past helped Boomers afford homes more easily.

How does the cost of education impact the financial stability of younger generations?

The rising cost of education, including high tuition fees and growing student loan debt, significantly burdens younger generations. College tuition has more than doubled since the 1990s, and student loan debt has tripled, making it harder for young people to save money and invest in assets like homes.

What is the impact of student loan debt on younger generations?

Student loan debt, now at $1.7 trillion in the US, is a major financial hurdle for younger generations. With many graduates carrying substantial debt, it delays their ability to save for important life milestones like buying a home or investing in retirement funds.

Why are entry-level jobs no longer considered 'entry-level' in today's job market?

In today's job market, entry-level jobs often require experience, which creates a barrier for recent graduates. This trend makes it harder for younger generations to secure jobs and start earning, as they now need prior experience to even qualify for what was once considered a starting position.

How does inflation affect the cost of living for younger generations compared to Baby Boomers?

Inflation has made everyday living more expensive for younger generations, especially with the rising cost of goods and services. However, home prices have risen even faster than inflation, contributing to the larger financial strain on Millennials and Gen Z compared to Baby Boomers, who faced lower inflation and home prices.

What steps can younger generations take to improve their financial situation?

Younger generations can focus on reducing spending, living within their means, and prioritizing savings. Investing regularly in a Roth IRA, contributing at least $250 a month, and increasing income through job switching are key strategies to build wealth. Additionally, lowering debt and avoiding large monthly expenses on housing and cars will help improve long-term financial health.