The Kids Are Alright

Millennials are not saving, but holiday spending is up.

The holidays are here. It’s a cheery time, full of family and friends and the gnashing of teeth about the spending and saving habits of the body politic.

That casualty-free blood sport includes annual forecasts on holiday spending, such as the 15th annual survey from CUNA and the Consumer Federation of America. This year, it found that 33% of Americans said they would shell out more this year than last.

Not very promising from the growth-is-good perspective, but the big trade does point out that less people are reportingthey’re spending less than in the past several years. Heck, 55% said they were in the 2008 survey, during the height of the recession.

Top-line results from an economic perspective are encouraging and holiday spending almost certainly will increase this year, says Mike Schenk, CUNA senior economist. However, elements of our survey underscore the fact many consumers continue to reflect significant concerns about their personal finances most especially in the realm of weak income gains.

Indeed, nearly half of the respondents a representative cross section of 1,009 Americans questioned by phone Oct. 30-Nov. 2 say they would not have an extra $1,000 needed to pay an unexpected expense. Lower-income households also reported much smaller income gains than higher-income households, the survey found, adding to the nation’s growing gap between haves and have-nots.

We are now in a climate where a comment like this: Our sweet spot is people just a couple missed paychecks from a financial issue is not from a payday lender but from the COO of a billion-dollar, completely mainstream Midwest credit union who talked to me last week.

Happy holidays.

Free-Spending Whippersnappers

Of course, no report on reports would be complete without some focus on those traditionally at the bottom of the income pecking order: young adults.

Right now, they’re typically classified as millennials, generally tabbed at between 18 and 30.

Because stereotyping comes naturally to our species, certain characteristics are assigned to this crowd, as if they were any different than their parents when they were that age.

One assumption is that they are particularly tech savvy. Joe Winn takes a shot at that in his Credit Union Geek blog with an entry titled Everybody Knows That. Another is that they have particularly different tastes in financial services. Snarky boomer Ron Shevlin takes that on in his call for a moratorium on millennial research, and we took our turn in a recent blog titled Get Off My Lawn.

And now we’re to assume these young folk are a mass assemblage of profligate spendthrifts, particularly prone to abysmal savings rates compared to wiser, older ones.

A Moody’s Analytics study of Fed data says workers under the age of 35 save at the rate of negative 2%. In other words, they’re not saving at all. According to a Wall Street Journal report on the study, that compares to about 3% for ages 35 to 44 and about 6% for people ages 45 to 54.

Hmm, 6%. That number sounds familiar. It’s the typical cap for a 401(k) match from an employer to an employee. Boomers likely pay closer attention to that sort of thing, because they can. But I digress.

The Who?

Reaction to the report and those like it inspired an insightful takedown of those assumptions by Catherine Rampell in a Nov. 13 column in the Washington Post titled The Coming of Age Ritual of Spend Now, Save Later.

Rampell observes: These numbers have inspired various condemnatory headlines and think pieces about my generation’s irresponsible savings deficit. The more sympathetic coverage has at least acknowledged the effects of student loan debt and high youth unemployment, but even those articles came loaded with judgment.

She notes that her generation are people just starting out in their careers while indulging in such frivolities as starting families and buying houses, along with bachelorette trips

And, Rampell adds, If you believe that people make spending decisions based on how much they expect to earn over the course of their lives one of the landmark concepts that won Milton Friedman his Nobel Prize it’s not so troubling that Americans have low to negative savings rates when they’re young.

Indeed, whippersnappers they may be (Rampell used that term in her column), perhaps the kids are, after all (as a group of British invaders first told us in 1965), alright.

November 25, 2014

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