Millennial are the people born between 1981 and 1996. This is the generation which saw the world usher into modern digital age. They are the eye-witness to the birth of personal computers, internet, mobile phones, and smartphones. All these give an impression that millennial have a better of everything as compared to their previous generation, however sadly this is not true. Millennials are the first generation in the history of humanity who are poorer than their previous generation especially in the areas of education and housing. Both of these have very high price tags these days. Most of the millennial have their first debt much before their first income with their education loans. By the time they are fresh out of college they already of handful amount of student loan on their head to repay. But their woes do not end there. Today the lifestyle and the standards of living are high even for the middle class, only to top it up with ever increasing inflation and real estate prices. So a millennial needs to repay education loan, maintain a standard of living, save for emergencies, invest money for building retirement corpus and also set aside a fair sum of money for their home loan down payment, all this with an in-hand salary which has not increased since the times when Mughals were ruling India. The constant demand of money all around and not enough income has pushed the Gen-Y much deeper into debt, whether it is education loan, a personal loan, a car/bike loan, a credit card or a home loan, ask this generation and they have faced it all even before turning 30!
In this digital age, one might assume that this generation must be pretty savvy with managing their money owing to all the information and tools available around them to help them be better with their money management, but instead, the truth of the reality is much far away from this assumption. And there is no single cause that we can point the blame towards. As such this generation is borrowing much more than all their previous generations so much so that the lenders are now creating new kinds of lending instruments such as Line of Credits which one can avail just in case they are not eligible to avail a personal loan.
So, What Happened?
People born in the late 20th century knew that it was not possible for them to have a better education without going into debt. The income and the savings of their parents were not just enough to finance their higher education. And once the education was over, they had a loan on their name even before they could earn a single rupee. The average annual compensation of a fresher in India has not changed much over the past two decades, while with the inflation of all the commodities of daily use has grown by leaps and bounds during this period, and so has the price of real estate and even the housing rent has increased manifolds. So a fresher, just out of college, is left with:
- A loan to repay
- A high rent to pay
- A higher monthly budget even for basic necessities of life
- A salary no better than the pocket-money in college.
- A lifestyle to look towards to (which costs at least 20 times their salary)
These are just the regular ones. On top of this, there are additional expenses, such as entertainment, travel, weddings (family, friends), latest gadgets, medical emergencies which just simply keeps driving one towards borrowing more and more to keep up with the demands. Apart from all of these, one also has to save a lot for their home loan down-payment, so that they can avail a home loan 5-10 years down the line. Also, this generation does not remains employed with their first company until their retirement to retire with a pension. Instead, they hop from one job to another and also need to save and invest to build a retirement corpus. There are other priorities in life such as owning a nice vehicle, have a fat wedding, a honeymoon abroad, nice interior for their home, all branded clothes and accessories, childbirth expenses, child education expenses, medical emergencies, investments of different sorts; the list is never ending while the income remains fairly limited.
So, are Millennial Only Borrowing?
Actually no. Even though they have so limited money compared to their expenses, and all kinds of debts to deal with, Gen-Y is actually good with their repayments. They no longer want to run a home loan for 30 years or a personal loan for 5 years. They want speedy solutions to meet their cash crunches, but they are also very eager to prepay their loans as soon as they can. As a result, they either have revolving credits or recurring credits. In the information age, they are more aware than their previous generation about money and have now better investments to support their lifestyle. They are also good at making the best use of their money whether it is opting for a cab instead of own car, buying things online with best deals rather than at physical stores or opting for payment methods where they have some benefit in comparison to paying with cash. As of today, almost everything has been made available online for this generation to buy, only with the big exceptions of a vehicle and real estate. And millennial are making the best out of these using the different deals, coupons, and vouchers which would help them save money. All this money saving is with the aim to repay existing loans as soon as possible only to avail a new loan for a new purpose.