The Balance study asked 1,405 respondents across Gen Z, millennials, and Gen X to share how they view credit and debt, as well as who taught them about money and how that education influences where they spend, save, and invest. We defined an affluent millennial as someone between 23 and 38 years old with an above-average household income. Due to the volume of debt across categories, affluent millennials report spending an average of more than 17% of their take-home pay on debt repayment, coming in second only to fixed expenses such as rent, utilities, and food.
Paying Down Debt Isn’t the Highest Priority
Surprisingly, when asked to identify their financial priorities, debt repayment comes in sixth on the list of top financial priorities for affluent millennials, specifically:
Carrying Debt Breeds Anxiety
Nearly one-third of affluent millennials report that financial insecurity causes them to avoid socializing, and fear they will never have a job that provides financial security. According to the survey, however, not all types of debt correlate to increased anxiety. Financially confident respondents are more likely to carry debt such as a mortgage, while those who are anxious are more prone to carrying a credit card, student loan, and medical debt. This has a notable effect on confident affluent millennials’ financial prospects. “Good debt,” like mortgages, is typically used to acquire appreciating assets—meaning their money is likely to grow for having taken on the debt.
Affluent Millennials Confuse “Good” and “Bad" Debt
If debt helps an individual increase their net worth, it’s generally considered “good debt”—a category that includes home mortgages and small business loans—while borrowing money to finance depreciating assets such as cars or carrying a credit card balance is usually labeled “bad debt.” “It’s rarely—if ever—a good idea to take on credit card debt, and the disconnect is likely a result of the widespread misconception that carrying a credit card balance helps your credit score, when it doesn’t,” said Christine DiGangi, Editorial Director at The Balance. “The good news is there’s a huge opportunity to help young people better understand their money, and they have ample time to correct their perceptions of debt.” The survey suggests perceptions of which forms of debt are “good” or “bad” may shift as we gain more experience, opportunity, and income. Gen Xers are more likely than their younger counterparts to understand the likely upside to take on mortgage debt (67%), as well as the downsides of taking on credit card debt—only 20% said they consider credit card debt as “good.” Conversely, nearly 1 in 3 Gen Zers (31%) think it’s good to take on credit card debt, but only 44% thought a mortgage was worth it.
Education & Engagement Make a Tangible Difference
So who is getting it right? Respondents who are engaging daily with their personal finances are twice as likely to feel knowledgeable (44% vs. 20%). And those who were taught about finances as teenagers are more likely to be highly engaged. This combination of knowledge and engagement manifests in affluent millennials’ confidence, or lack thereof, about their financial situation. Among those who reported feeling financially anxious, only 25% felt knowledgeable about managing debt. Conversely, 81% of confident respondents said they felt knowledgeable. Furthermore, these confident affluent millennials are also five times as likely to be debt-free (3% vs. 15%), demonstrating the powerful connection between financial literacy, mindset, and the ability to make sound decisions with money.
Methodology
This survey aimed to identify what motivated particularly saving, spending, and investing decisions for the millennial generation. To understand their approach to finance and how their personal financial education have impacted their decisions as adults, we studied respondents who have the disposable income to buy and invest, eliminating extreme financial hardship from the reasons they may not partake in the financial system. Working with market research firm Chirp Research in May 2019, The Balance obtained responses from 1,405 Americans, including 844 affluent millennials (ages 23-38), through an online survey, and compared their actions and attitudes to 430 Gen X and 131 Gen Z respondents. Affluent younger millennials were defined as those ages 23-29 with a household income (HHI) of $50,000 or more, and older millennials as those ages 30-38 with an HHI of $100,000 or more. The survey’s median millennial income was $132,473, compared to a median millennial HHI of $69,000. Before fielding the quantitative survey, The Balance wanted to ensure the right kinds of questions would be asked, in language that resonated with the respondents. The Balance worked with Chirp to conduct nine 60-minute 1-on-1 interviews with participants in Birmingham, Chicago, Dallas, and New York City. The interviews focused specifically on the language affluent millennials use to describe experiences managing their own finances, as well as their opinions, beliefs, and attitudes toward managing money and investing.
