Thursday, February 22, 2018
Business

Trigaux: Millennials think they have it tough financially? Wait till they become parents

Amid the excess of financial surveys that find they make too little, owe too much, live too long in the basements of their parents, fail to save for retirement and now seem unlikely to match their parents' living standards, millennials — folks born between 1982 and 2004 — can't seem to get a break from all the poking and prodding.

While better educated than the prior generation, too many millennials graduated (many during the Great Recession) to jobs that have little to do with their intended fields, generally pay less than envisioned and offer limited career prospects.

Housing costs, be it rental or ownership, have soared, especially around larger metro areas where so many millennials tend to cluster. The old rule of paying no more than 30 percent of your paycheck for housing now sounds positively quaint and explains why so many younger adults live in larger groups and share expenses.

Student loan debt compounds the financial drag on many millennials who would like to buy a home but can't also take on the addition of a hefty mortgage.

All this, in turn, has pushed many millennials to remain too financially dependent on their parents (and grandparents). Some live at home. Others are subsidized by outright gifts of money or have some portion of their expenses (cellphones, health care, auto insurance, retirement accounts or even Netflix access) paid for. Let's not forget tapping grandparents for child care, a huge windfall for millennial parents — even if most grandmas, dubbed "granny nannies" by researchers, insist theirs is a labor of love.

A new TD Ameritrade survey of millennial parents from 19 to 37 sheds some light on how much help they are getting. On average, millennial parents received the equivalent of about $11,000 in the past year in financial support and unpaid labor from their baby boomer parents.

Kids, at least in America, do not come cheap. A new study from the U.S. Department of Agriculture shows a middle-income family (income from $59,000 to $107,000) with a child born in 2015 will spend on average more than a quarter million dollars to raise that child to age 18.

Lower-income families will also spend more than $212,000. And higher-income families will shell out more than $450,000. That's an average of more than $25,000 per year.

The USDA study assumed a two-child family and focused on the costs of raising the younger kid. Compared with a two-child family, the study found that couples with one child spend 27 percent more.

All that dough — to cover housing, food, education, health care, clothing, child care and transportation — has to come from somewhere.

And those hefty sums do not include a penny for college.

"The direct and indirect costs of raising children are considerable, absorbing a major share of the household budget," the USDA study concludes. On average, households in the lowest income group spent the least on a child in total dollars but the most — 27 percent — of their before-tax income. Those in the middle-income group spent 16 percent. And while those in the highest group spent only 11 percent of their income, the total sum approaches half a million dollars.

A wide range of recent analyses of millennial financial pressures are not optimistic:

• "Today's millennials are suffering from the weight of financial fears, which in turn is affecting their on-the-job performance and personal well-being." So concludes PwC's "2016 Employee Financial Wellness Survey."

• Nearly two-thirds (64 percent) of working millennials say they will never accumulate $1 million in savings over their lifetime, according to the "Wells Fargo Millennial Study." The same 2016 study found 74 percent of millennials do not think that Social Security will be available for them at retirement. Neither finding bodes well for that generation to age in much financial comfort, much less pay big bucks on children.

• A 2016 study examining the state of the American Dream found that just half of people born in the 1980s make more than their parents.

That contrasts to the 90 percent of children born in 1940, according to researchers at Stanford University, Harvard University and the University of California at Berkeley.

These findings and others bring us to the key question about millennials, now the largest living generation in the country: If young adults feel so financially pressed, how can they ever afford to have children?

Millennials are evolving with the financial times. Many are postponing marriage. And those that do choose to have kids are having fewer of them, and doing so later in life.

That's aided by the greater financial stability that typically comes with age, but also by advances in fertility treatment that has made it easier for older couples to have kids.

Population numbers from 2015 show the number of children born to women in their 20s fell while there was an increase in babies born to women in their 30s and 40s.

As the TD Ameritrade study found, about half of millennial parents said they'd have more children — if money weren't an issue.

But as many millennials are learning the hard way, money is almost always an issue.

Contact Robert Trigaux at [email protected] Follow @venturetampabay.

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