Millennials Are Ruining The Economy.

Once the guys, it's Graham here. So if you just read the title and decided to immediately click on my video, well, welcome to a brand new article by CNBC discussing a theory in which stingy Millennials, just like myself, are to blame for the sluggish economy. And if anything, we're holding it back from all of its potential and glory because we're not spending enough.

Let me just say that one more time so it has a chance to sink in a little bit more: our economy isn't doing as well as it could because we're not spending enough money. Now, to be fair, articles like this aren't exactly new. For the last several years, Millennials have pretty much been blamed for every problem in existence. Like we've hurt the casual dining business, we've slowed the wedding business, we've closed hundreds of department stores because we prefer to shop online. Oh, and we're also kind of ruining the soda business because we're now drinking less of it.

So, uh, yeah, that's kind of cool. But anyway, data like this isn't entirely surprising because Millennials are now the largest living generation here in the United States. So I think it's pretty safe to say that we now have the upper hand in terms of market supply and demand. According to economists, we could wreak havoc on the economy's growth as entire industries now shift around our own wants and needs.

So here's the theory behind this—whether or not it's actually true—and what I believe is most likely to happen as soon as you hit and destroy the like button. That's right, just destroying the like button helps out the YouTube algorithm and this channel tremendously. So if you... what am I doing? That would be amazing, thank you very much, and let's get into the video.

So let's start here back at our original CNBC article that stingy Millennials are ruining everything. They're spending less money than previous generations, they're saving a higher proportion of their income, and all of that is causing the economy to grow at a much slower rate than it was previously. Or in other words, as we consume less, supply rises, demand slows, and that limits the economy's growth.

When I read this, I wanted to know two things: one, where does all that extra money go? And two, are they spending less money by choice or is it by necessity? And does a higher personal savings amount mean that they're saving more money on a lower income or they're saving a higher percentage of their income while they're now making less money?

Well, let's first answer, where does all that extra money go? And finding that answer is surprisingly really, really difficult because the research is all over the place. On the one hand, a study conducted by Charles Schwab found that Millennials are more likely to spend much more freely on pretty much everything compared to previous generations, and that includes things like taxis, coffee, restaurants, clothes, and so on.

Oh, and speaking of spending more freely on coffee, another study found that 40% of Millennials spent more money buying coffee than they do on their own retirement, which is not okay because you could make an amazing cup of coffee at home for the low price of about 20 cents a cup (link in description).

However, other studies show a much less extravagant and much less exciting lifestyle. A Gallup poll found that 18 to 29-year-olds are now spending an average of $20 less per day than they were 10 years ago, with much of that spending going towards necessities like healthcare, utilities, and groceries. It was also found that a large portion of that remaining income goes towards paying student loan debt, with an average debt of about $30,000 for 2018 graduates.

Because of that, more Millennials—one out of three to be exact—are living at home with parents for longer. Fewer Millennials are also getting married and they're waiting longer to do so, and fewer Millennials are having children—all of which factors into less spending into the economy and factors into why it's growing so sluggishly.

But is our economy really faltering because of our spending habits, or is there something much deeper to the story that they did not mention? Because now we get into my second question: even though the percentage of money saved is going up, does that actually mean we're saving more money in terms of a dollar amount? And the answer to that is no. No, we're not saving more money.

See, according to the Federal Reserve, Millennials are actually spending less money because they straight-up just have less money to spend. And here's some rather scary statistics when it comes to that: Millennials are earning 20% less money than Boomers did, with the average salary being just over $35,000 a year, according to the Bureau of Labor Statistics. Now, in addition to that, consumers are also spending 16% more on housing, healthcare increased by 21%, and education costs skyrocketed by 65%. Lastly, since 2004, the cost of student loan debt has grown by over 160%.

So it's almost no wonder why Millennials are not spending as much money as previous generations because they just straight-up don't have as much money. So why is it then that Millennials are saving a higher percentage of their income given that now they're in a worse financial position than previous generations? Well, here's my take on it: as a millennial who also happens to like to really want to save a lot of money, I believe if people are making less money, it causes them to be hyper-focused on getting the best value possible and being extremely selective about where they spend their money when they do decide to spend it.

But there's also another very interesting perspective: because the Chief Financial Analyst from Bank Rate said that because the Great Recession happened during a financially formative time for many Millennials, they don't have the same spendy consumption mentality as previous generations. I have to say I agree with this. Almost all my friends entered the job market at a time when the economy was pretty much at its worst. Very few companies were hiring, there were massive layoffs, the real estate market had pretty much just completely tanked. We really all saw firsthand what can happen to someone when they don't have the savings or the backup to really weather through that storm and get through it.

Okay, all of that really just caused savings to be at the forefront of our minds, even if it's just out of an abundance of caution. Not to mention there also recently seems to be a strong cultural push towards frugality, minimalism, and financial literacy—perhaps all stemming from the situations and experiences caused by the Great Recession.

So given all of that, is it actually true that Millennials are responsible for the sluggish economy? And I have to say the answer to that is a bit of a yes, but also a bit of a no. So it's really no surprise that our economy does benefit from a surplus of spending: the more money gets spent, the more it could circulate throughout the economy, and the more the economy could grow. When you cut off that spending, it's bad for business, and that's also bad for growth.

However, if people are not spending money, it has to go somewhere. Generally speaking, the more money that people could save means the more money that they can then invest. This money gets invested back into businesses, which can further innovate and adapt, which again just winds up back in our economy, really improving it on a macro level. So as long as people aren't just hiding all of their money underneath a mattress and not doing anything with it, a higher personal savings rate is bad for certain businesses, it's good for the overall economy, and it's great for the person who's able to save more money if it means they can go and invest it.

Another benefit towards this is that the more people are able to save, the less money is going to be spent on debt repayment; the less money is going to be spent on bankruptcy. That just means more free cash flow that could circulate back into our economy towards more meaningful and valuable purchases. And that brings me to another very interesting perspective: now given that we're seeing a shift and emphasis towards minimalism, living frugally, saving money, and not spending it, what if everyone all of a sudden became financially literate?

No one spent any money, everyone saved. Would that be enough to actually drop the entire economy? In the short term, it would probably have a pretty devastating effect, also known as the paradox of thrift. Now this is an economic theory where if people save money and cut their spending, eventually demand for those services will fall and then the total savings will eventually drop as well. Because one person's income is another person's spending; hence the paradox of saving money. Because the more people are saving, the less can be saved. Get it? Because that's a paradox.

So that means, yes, in theory, if everyone was financially literate and everyone saved their money, and everyone cut out all frivolous spending, then our entire economy would pretty much just be turned upside down. But then eventually, it would be overhauled in such a way that allows us to continue to progress as a society. But until our economy adapts and adjusts to all of this, it would not be pretty if everyone just suddenly stopped spending money.

However, another theory suggests that eventually, a lack of spending and therefore a lack of demand will cause lending interest rates to go so low to the point that it just promotes riskier lending and riskier investments to a point where eventually we just end up where we were before. But I personally believe that if everyone were to suddenly become financially literate, we would have a very prosperous society.

We'd have the excess money to pursue more fulfilling and innovative work. We'd also find ways to increase productivity with the resources that we now have available to us. Not to mention the less we consume, the less we need to produce, which means the less we can work. So that means we would consume less, we would work less, we would earn less, but we'd become way more efficient as a society for what we do use.

From that point on, we would likely just shift our values to other things—like for instance, if it's preserving nature, maybe that would increase business and money into those sectors. Or maybe we just place more emphasis on healthcare and preventing disease, and that causes more demand to shift to those sectors. Or maybe we displace a stronger focus on smashing the like button if you have not done that already for the YouTube algorithm, because it dramatically helps the channel.

And maybe one day we can get a lot of likes on a video like this one. The market would really just dictate where the resources go, where we spend our time, and where there's not enough demand, and this is always going to be a constant ebb and flow until pretty much the end of time.

I really believe that long-term, the net benefit to society would be huge if all of us were savers and really allocated our resources to the projects and things that meant the most to us—not necessarily going and buying the newest, most expensive car, or trying to keep up with the Joneses, or trying to impress other people, or using that money to repay student loan debt, or just cash advances. Nah, none of that.

Now, realistically, I don't think that is ever going to happen. We as humans are probably just way too greedy as a whole to ever come together in such a way where everybody is suddenly efficient. There's always gonna be people who want to slack off; there's always gonna be people out there who just want it now at any expense possible. And there's also going to be plenty of other people willing to work even harder and delay gratification to make up for all of that.

As people, we're just wired to constantly want more and there is never enough. I don't think that will ever change. And given the article that brought us here in the first place, I do believe we are seeing a cultural shift away from reckless spending and into one of more thoughtful, meaningful purchases. I think it's finally just becoming cool and socially acceptable to be financially literate, to live below your means, and to save your money.

I think we're gonna be seeing a lot more articles and channels like mine who do their best to make saving money and living frugally just start to be a little bit more trendy. So the answer is yes, frugal Millennials are slowing down the economy to a certain degree. But to me, this is just the market dictating where we should be placing our resources and time.

It's a lot different than what it was 30 years ago. Millennials just really want more value for prices, more flexibility, and we're willing to consume less in order to get it. Even though Millennials are getting paid less and their expenses are going up through the roof, how they choose to spend their remaining money not only says a lot about them but also where society is going in general; which is really placing an emphasis on saving more money, living below your means, improving your credit score, being financially literate, and obviously smashing the like button if you have not done that already.

If the economy goes down in the short term because it adapts and shifts around our new values, then so be it. I do think in the long term, it is really all for the greater good. So with that said, you guys, thank you so much for watching! I really appreciate it. If you guys enjoy videos like this, as always make sure to subscribe. Also, hit the notification bell so YouTube notifies you anytime I post a video.

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And again, with that said, thank you so much for watching, and until next time!