(MP) Many Millennials are asking themselves, “Can we afford to have babies today?” There’s no question the middle class isn’t what it used to be. Although the economy is certainly back on track that doesn’t mean everyone is benefiting from the track. While their predecessors, the baby boomers are enjoying the time of their lives, Generation Y as they’re sometimes called, may have to tighten their budgets a bit before having babies.
Born between 1982 — 1998, they account for $1.3 Trillion in direct annual spending and engage more intensely with brands than do baby boomers. The problem is these 17 to 34 year olds don’t have the money our baby boomers have and because of the target advertising – they’re spending has gone amuck. If you earn more than $35,300, you’re bringing in more than half of this generation, according to one Fed’s survey. In 2014, those under age 35 had median earnings of $37,600. That’s a drop of $2,300 during the past three years.
Generation Y is spending big money, that’s why some are choosing to delay becoming parents. It’s financial thing. They’re thinking about how much debt they have now, how much money they want to save, and all the brand named clothing, apps, and vacations out there isn’t helping either. Analysts say that cost for having a baby the first year alone is around $26,000, and CNN Money said that it costs $241,080 to raise a kid from birth to age 18. This doesn’t even include the cost of college! Instead of “American dream” millennials may have inherited an “American Nightmare”. And at this rate many won’t be able to have kids until age 42.
Rising student debt is a central obstacle on the complex new financial landscape confronting Americans, particularly millennials just starting out. It not only has this generation delaying having children but many are living with their parents. Thirty-two-year-old Myra Chelsey would like to give her younger self two pieces of practical financial advice. First, go to state school; it’s far cheaper than a degree from a private college. Secondly, take on less student debt. College degrees have set our millenniums back over $50,000 to 100,000 in debt. Living with her parents helped Myra pay off her student loan debt, while saving for their first home. “If not for our student-loan debt, we could have saved more cash in our 20s, or would now live in a larger home,” says Chelsey.
Their first home
Then there’s the cost to by their first home for the family. And depending on where they chose to live will dictate how much “Salary needed to buy a home.” Interest rates for 30-year, fixed-rate mortgages are low right now. But other factors include credit scores and available down payment on a median-priced home in their market. “In Cleveland, people need a base salary of at least $19,435 a year to afford the average home, while San Franciscans must make upward of $115,000 annually,” says Megan Willet inside the Business Insider.
While the Obama healthcare law has extended coverage for millennials up to age 26, it doesn’t help out when starting their own families. The average annual cost of healthcare for a family of four is $22,030, according to Forbes. In it Dan Munro wrote – “the employer pays about $12,886 in employer subsidy while the employee pays the remaining $9,144, which is a combination of $5,544 in payroll deductions and $3,600 in employee out-of-pocket costs.” It’s no wonder millennians are waiting to have children.
How millennials Roll?
Millennian couples may have municipal transportation available in their locals. The median price for two person household could run $1,200 per year. But if there’s a need for two cars that price rises. I recommend leasing a car instead of buying. I never recommend my clients to buy automobiles because they’re depreciating assets. The cost of leasing a car is the total package, or the total amount of money you will be spending on the lease. This includes down payment and monthly payments. A car lease will have specific limitations on the mileage that is allowed to be on the vehicle at the end of the lease term. An example of this is 36,000 miles and a three-year lease. Typical millennial out-of-pocket expenses for a leasing a car will be $7,000—far less than the $23,736 it will cost for buying the same new car. But there are cons: the insurance costs for leasing a car are normally higher than that for buying a car. Also, when comparing leasing costs versus buying, tax considerations also weigh in. Many consumers can deduct leasing charges as legitimate business expenses, thus writing off the entire cost including all maintenance and repair fees.
Gone are the days of retiring at 55 or 60. Now, many adults are having to work closer to 70 because they did a poor job of saving for retirement their entire lives. The average 401k balance near retirement is a dangerously low $101,000. That’s not enough money to live off of, and as such, most are having to work longer. Plus, Financial literacy is a big problem for Millenniums, although it isn’t unique to their generation. “In many ways this is the biggest problem facing the country in regards to retirement,” says Jamie Hopkins, assistant professor of taxation at The American College of Financial Services in Bryn Mawr, Pa., and associate director of the New York Life Center for Retirement Income. “It is incredibly difficult for our Millenniums – or any generation – to properly plan for retirement if they do not understand Social Security, withdrawal strategies, annuity products or even more basic financial concepts, such as the importance of budgeting and compound interest.”
Millenniums average household budget
The Fed survey showed the average budget of a millennial couple included the following as you can see I didn’t add baby’s costs:
- Housing – $10,023
- Pensions, Social Security – $5,027
- Housing – utilities, fuels, public services – $3,477
- Food – food at home – $3,465
- Transportation – vehicle purchases/ leases – $3,244 – $7,000
- Transportation – other expenses – $3,130
- Healthcare – $2,853
- Entertainment – $2,698
- Food – food away from home – $2,668
- Transportation – gasoline, motor oil – $2,384
- Apparel and Services – $1,881
- Cash Contributions (optional retirement and cash savings) – $1,821
- Housing – household furnishings, equipment – $1,797
- Education – $945
- Housing – household operations – $984
- Miscellaneous – $808
- Housing – housekeeping supplies – $639
- Alcoholic Beverages – $457
- Personal Care – $588
- Life, other personal insurance – $309
- Reading – $118
In conclusion, the one thing I am certain about the human spirit is it’s drive to procreate. Facts and budgets will never beat out our millennials need to have babies. They will sacrifice whatever is needed, just like their parents and America will survive. Left in their hands maybe the world will become a better place.