Categories: Market Overview

Millennials are Killing the Economy… Because They’re Saving Money

Millennials have been accused of killing a lot of industries (cereal, beer, housing, mayonnaise, napkins, and politics). But this might be the stupidest theory of them all. According to one investment bank, millennials are killing the entire economy. And how? Because they’re doing the decent thing and trying to save their money.

The theory – outlined by investment analyst Travis McCourt – blamed “frustratingly low growth” in the economy on a “generational shift” in people saving money. Translation: millennials are spending less, leaving companies unable to sell enough ‘stuff.’ Since the financial crisis, the personal savings rate in America has jumped to 8.1%, up from less ~2.5% in the mid-2000s. The financial crisis has made young people wary of spending and investing. The theory is technically accurate. Spending and investing does stimulate economic growth. And ‘hoarding’ your money in a bank account means you’re not spending it on cars, coffee, restaurants, etc. You’re contributing less to the economy. McCourt laments: “Savings rates are now higher leading to excess supply seemingly everywhere in the economy.”

In simpler terms, millennials aren’t spending enough money. But maybe… just maybe… that’s the wrong way to define economic success. Throwaway spending, credit cards, and debt might boost Wall Street investors, but it’s a false economy. It seems young people can’t do right for doing wrong. They’re blamed for spending too much on coffee and avocados while simultaneously being slammed for saving too much. In the not-too-distant past, saving money was encouraged and rewarded with strong interest rates. Now, the entire economy is built on low (or negative) interest rates.

Millennials are Killing the Economy… Because They’re Saving Money, CCN, Oct 08
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