This cohort (those ages 18 to 29) is driving the growth for luxury goods in the U.S., say Morgan Stanley analysts in a December report. The analysis found that living at home freed up older Gen Zs and younger millennials discretionary spending, enabling them to snap up designer handbags and watches. Ramsey, a self-made millionaire and author of numerous personal finance books, blasted the trend on a recent episode of The Ramsey Show.
So, let me get this straight. You live in your mommas basement, but you got a Coach purse, Ramsey said. Heres whats going to happenyou cannot avoid life, its coming for your butt. Momma cant protect you.
Saying the trend will result in a trainwreck, Ramsey blames not the young adults but their parents for out of control helicopter parenting and coddling.
The problem is youve got debt, youre not earning enough money, and youre not doing enough to go out and change it, co-host Jade Warshaw added. Mom and dad cant do this for you.
But the situation is a little more complicated than that. The economy, rather than parenting or lack of willpower, is forcing many young adults to live at home. (The Ramsey team didnt respond to request for comment.)
Living at home can help young adults save money
Millennials, a highly educated cohort who graduated into the Great Recession and its aftermath, entered a difficult job market while saddled with enormous student-loan debt. Many have since been able to make strides in building wealth, but the long act of getting there has prompted them to marry, start a family, and buy a home at a later time than their parents didif they even partook in these life milestones at all.
Its almost like we dont want millennials to get a piece of the American Dream, André Perry, a senior fellow at Brookings Institution, told Fortune in November.
Gen Z has also faced its share of financial challenges, the oldest of whom were thrown into a pandemic and dismal labor market at the foot of their careers. While they gained the upper hand at work as the job market bounced back and recession threats motivated them to save more than other generations, many doubt theyll be able to save enough for retirement and or to buy a home.
Both generations are now facing 40-year-high inflation for the first time, with some unable to afford a roof over their heads. U.S. rent prices increased so much last year that Americans now have to work six hours more per month to afford it than they did before the pandemic.
Sky-high rent is why 39% of the millennials who moved back in with their parents last year did so, per a survey by PropertyManagement.com. More than half said they boomeranged back home to save more money.
Its proof that living at home with parents can be financially beneficial. This should not necessarily be viewed as a negative thing as long as there are clear fiscal goals in place, Doyle Williams, an executive vice president at Country Financial, said back in 2018, adding that this can help millennials build an emergency fund and save for a down payment.
At the time, the Country Financial Security Index found that 35% of millennials were still living at home with their parents. That stands at one in four today, per the PropertyManagement.com survey. A separate study found that nearly 30% of adult Gen Zers still living at home with their parents, held back from moving out on their own by the rising cost of living.
Sure, some young adults prefer to treat themselvesafter all, Gen Z is motivated by affording material goods more than any other generation and began spending on these high-ticket items earlier on. But if thats the case for those living at home, that doesnt mean theyre also not socking money away. It also doesnt mean that every boomerang kid is splurging on luxury.
Many just hope that living with their parents will help them one day afford what was once more easily attainable for mom and dad.
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