I’m having déjà vu as I look at all the young people in their 20s and early 30s out buying new construction and other homes. People aren’t earning any more money, but prices keep going up. I recently read an article by Wall Street Cheat Sheet about the 3 reasons people should be concerned about the economy. I think the people who need to be most concerned are Millennials who have a lot of student loan and credit card debt yet want to purchase a home. The Wall Street article cited a study that showed 75 percent of Americans are pessimistic about the U.S. economy. As a parent of two young Millennial children, I am worried that they are entering the workforce just as we enter another stock and housing bubble similar to the one that leveled my 401(k) and put us underwater on our mortgage.
Dealing with inflation
Even if my sons purchase homes while interest rates are low, they will have trouble affording their mortgage or car loans when inflation hits. Most people don’t budget for fuel costs because they assume gasoline won’t hit $5 a gallon. According to the Wall Street article, the declining value of the dollar may also affect consumers.
Holding down a job
If another recession occurs, it mean Millennials will never know the meaning of the term, “job security.” Unemployment doubled to around 10 percent during the Great Recession. Many of my Generation X and baby boomer colleagues lost their jobs. Many Millennials couldn’t get jobs. To prepare, my sons are choosing professions that should be recession proof such as jobs in health care.
Overcoming financial stress
Without a doubt, most people experienced financial stress because of the Great Recession. While Generation X was hit hardest by the last recession, I think Millennials will suffer the most this next time around. They are the ones out buying new construction homes at prices that are now at the housing bubble levels even though income hasn’t gone up. To hedge against a recession, I’m teaching my sons to invest in dividend-paying stocks in regular investment accounts. I want them to have a stream of passive income that doesn’t fluctuate too much.
My children might have to wait another 5 or 10 years to buy a house, depending how long it takes for the current boom and doom cycle to play out. Since mortgage rates might go up during the latest economic cycle, they are putting money aside as they live a frugal lifestyle. Being on the younger side of the Millennial generation, they avoided student loan debt so it won’t hold them back when the economy finally recovers. Sadly, most of us are still waiting for the economy to recover after the last recession that it’s hard to imagine the economy unraveling all over again.
More from this contributor:
Financial Setbacks for my Sandwich Generation
The Myth of the New Rich
Surviving Partial Retirement as a Gen-X’er