Understanding the financial challenges faced by the millennial generation

Millennials – the term used for anyone born between 1981 and 1996 – have come of age during a period of vast technological change, economic disruption and evolving societal norms. These transformations have uniquely shaped their financial perspectives and experiences.

In fact, it’s fair to say that the millennial generation has been hit by some of the most significant economic events of the past century – from the Great Recession of the late ‘00s to the recent pandemic – all of which has impacted their ability to build wealth and find financial stability.

An overview of the millennial generation

Millennials are so called because they’re the first generation to enter adulthood in the new millennium, and this has set them apart from previous generations in several ways. 

For example, millennials will remember a time without the internet and advanced digital technology like smartphones, but are also considered digital natives. 

Millennials are also noteworthy for being the most well-educated generation as well as the most racially diverse, and for buying their own homes, getting married, and having children later than those in the Gen X or baby boomer generations – a characteristic tied to the financial challenges that the generation has faced.

Economic challenges for millennials

Many millennials have struggled with financial challenges that were less pronounced for baby boomers and Generation X at similar stages of life. 

Their attitudes towards money are markedly different, too, now focusing more on financial wellness and the balance between quality of life and fiscal responsibility. This can largely be attributed to the economic climates they have grown up and matured in, and the economic challenges they’ve experienced. 

Economic turbulence

Economic instability has been a consistent theme in the lives of many millennials. The Great Recession (2007 to 2009) coincided with the formative years of many young adults in this group, altering their perspectives on money and significantly affecting their career trajectories.

In the UK, the aftermath of this financial crisis was felt through austerity measures, impacting public services and employment opportunities. All of this was followed by the coronavirus pandemic, which sent shockwaves through the economy, plus further recessions in 2020 and 2023.

Like the UK, the Federal Reserve in America and other central banks worldwide have similarly grappled with recessions and policies that have seen interest rates plummet, affecting savings rates and overall economic recovery.

The ongoing repercussions of these economic downturns, coupled with recent inflation surges, continue to challenge millennials’ financial security, making it difficult to create everything from a financial safety net to a retirement plan. Because of this, many in the millennial demographic have struggled with the cost of living, amassing significant credit card debt to make ends meet and further adding to their financial stress. This is even worse in the US, where many American millennials face huge healthcare costs or health insurance fees.

Student debt

Many millennials were taught that higher education was a crucial path to securing well-paying jobs, leading many millennials to pursue degrees.

However, this has often come at the cost of accumulating substantial student loan debt. Data shows that the promise of higher income has been dampened by the reality of paying down large debts, a burden that previous generations did not face to the same extent. And this debt has far-reaching consequences on other financial decisions and milestones, such as homeownership and retirement savings.

Housing and homeownership

Homeownership rates among millennials lag significantly behind those of previous generations at similar ages.

In the fiercely competitive housing markets of major cities like New York and London, soaring home prices and stagnant wages have made down payments and mortgages less attainable. And rising mortgage rates aren’t helping anyone, no matter where they live.

The rental market isn’t much relief either, with high rents consuming a large portion of monthly income, making it challenging for young people to save enough money for a home or otherwise invest in their future.

A 2024 House of Lords report on the housing needs of young people highlights some of the data specific to the UK:

• 35% of 25- to 34-year-olds in 2017 were homeowners, a decrease from 55% in 1997.
• Average property prices in England had risen by 173% (after adjusting for inflation) and 253% in London since 1997.
• The proportion of young adults who would need to spend more than six months’ income on a 10% deposit for the median property in their area had increased from 33% in 1997 to 78% in 2017.

Salaries and employment

While millennials are the most educated generation to date, this has not necessarily translated into financial success or full-time employment. Many millennials left education to find themselves in a job market characterised by job scarcity, underemployment, and salary stagnation. 

 

“In the wake of the 2008 global financial crisis, unemployment was elevated in many countries, and reached a high of 11.8 percent in the UK in 2011,” Statista explains. “With young workers generally being the most impacted by such high unemployment, millennials bore the brunt of this crisis, and in 2012, there were 1.39 million millennials unemployed.”

However, this picture is slowly changing shape, with lower levels of unemployment coupled with millennials’ adaptable nature.

“In more recent times, millennials were the generation most associated with career advancement, with 26 percent of people in the UK believing millennials would value this over a work-life balance, the most of any generation,” says Statista. “Other traits people associated with millennials were being financially insecure, open to different lifestyles, and a willingness to make lifestyle changes for the environment.”

What comes next: financial challenges for the Gen Z and Alpha generations

As millennials continue to navigate their financial realities, the upcoming generations, Gen Z and Generation Alpha, are on the brink of facing their own economic challenges. These younger generations are set to inherit many of the systemic issues that have not yet been resolved such as high educational costs, uncertain job markets and unaffordable housing. But the experiences of millennials offer valuable economic lessons that can help future generations achieve financial stability and well-being for themselves – and for the wider global economy.

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