Using the broadest strokes, Baby Boomers, who grew up in the land of plenty that was postwar America, spent their formative years as spenders. Cynical Generation X, aptly distrustful that either government or business would take care of them, turned out to be precocious risk-takers. Millennials, coddled by their helicopter parents and scared straight by the Great Recession, have turned into a generation of savers.
Yes, young adults who have gone no further than high school are worse off than in recent history. But fewer Millennials fall into that camp. Here’s an eye-opening statistic: In 2013, 34% of 25- to 32-year-olds held at least a bachelor’s degree, versus 25% of Gen Xers (born between 1965 and 1980) and 24% of Baby Boomers when they were at the same age, according to the Pew Research Center. And despite their greater numbers and the catastrophic job market during the past five years, those Millennial college grads were earning slightly more, in inflation-adjusted dollars, than Gen Xers did at the same age–a median of $45,500 in 2013, versus $43,663 in 1995, Pew calculates. Yes, the student loan debt accrued collecting all those degrees will surely prove a drag on Millennials’ net worth. But at a May St. Louis Federal Reserve conference focused on personal balance sheet issues, there seemed to be more worry about Gen Xers, who bought homes for top dollar before the real estate crash. Bottom line: a torrent of well-educated Millennials flooding the “mass affluent” market of those with at least $100,000 of investable assets over the coming years.
The Millennials’ quest for security is one reason they’re turning out to be young savers. Like their Gen X elders, very few believe that they’ll get much, if anything from Social Security. And they hit the job market just as Congress made it easier, in 2006, for companies to use “automatic enrollment” for their 401(k)s (about 60% of employers surveyed by Aon Hewitt now use it). The upshot: Many Millennials have started saving for retirement in their early 20s, compared with a median age of 35 for those Boomers who have saved, according to a new Transamerica Institute study.
Ironically, this generation of digital natives intuitively understand disruptive technology, making them better positioned than any before it in human history to launch businesses of substance (with the Mark Zuckerbergs and Kevin Systroms becoming fabulously wealthy as a result)–yet taken as a whole, they’re too risk averse to leave a good job for a risky gig. Last year, with the job market recovering and the number of “involuntary” entrepreneurs falling, 20- to 34-year-olds had the lowest entrepreneurial startup rate of any age group–a rate which was just half that of 45- to 54-year-olds. In fact, the startup rate in 2013 for young adults was the lowest since the Kauffman Foundation began tracking it in 1996. “They feel constantly obsessing over making money is no way to live,” says Neil Howe, likely America’s biggest expert on generations.