Key Takeaways
- The millennial generation is the largest part of the workforce in our country right now.
- As millennials age, the amounts they’re saving and spending are changing.
- These saving and spending changes are impacting our economy and will continue to do so for several years.
It’s said that big transitions happen to us six to eight times in our lives. We graduate from school, get a job, get married, have kids, lose a loved one, and so forth. According to Harry Dent, one of these transitions is occurring right now for millennials, going from young married to young family status (with young family defined as those between the ages of 35 and 44).
Along with transitions in life stages come about a 25% increase in income and a relative increase in spending, as millennials appear to follow the same trend as their parents and grandparents. The expenses tend to fall into a few different areas: new cars, new homes, food, select apparel, and entertainment.
Why is this important? Well, there are currently 90 million millennials, making up the largest part of today’s workforce, and they’re impacting our economy with their incomes and spending habits.
But that’s not all—there’s another factor at work here. If you look at the grandparents of the millennial generation, the Depression-era babies, they saved a lot. In fact, if you examine personal saving rates over the years, you’ll find that it went from 10% in 1990, down to 2.5% in 2005, and then back up to 8% by 2019.
This tells us that millennials are saving a lot more than their parents did; they’re saving more like their grandparents and great-grandparents did. And, if you’re saving more money, then you’re spending less, and spending has a huge impact on our gross domestic product (GDP).
So we’ve got two opposing forces here: one where a 25% increase is occurring, and one where millennials are saving more money, thereby tempering that 25% increase.
Why is this important? Well, we’ve experienced a very slow economic growth since the Great Recession of 2008 – 2009. We’ve seen just a 2% growth rate over time, and there has been a lot of speculation about where this is going. Based on these demographics, we should see a pickup in this growth, though it’s difficult to say how much if millennials are saving more.
Ultimately, saving more is really good in the long term, but in the short term it could mean less growth for our economy. More importantly, this transition for millennials is occurring and we’re seeing its impact. Both saving and spending are increasing, so it probably portends greater GDP, and the spending boom they’re creating is something we’ll likely see for another 15 to 20 years. Until next time, enjoy.
Gary
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