The Unique Impact of Inflation and Rising Rates on Millennials

Today’s millennials are in their 20s, 30s, and 40s. No longer teenagers, many of them are already becoming parents, climbing the ladder in their careers, and much more. Every generation has unique challenges, and the top ones faced by millennials center around student loans, housing, and wealth building. Inflation and rising rates are shifting the financial well-being of all Americans, but the life stages many millennials find themselves in will compound existing issues – while also presenting rare opportunities. 

Life can get expensive 

1. Student loans 

Millennials are sometimes referred to as the student loan generation. Several things contributed to the debt landscape they’re facing today, including:

• The rising cost of college. In the 1980s, students could attend a public college for $1,490 in annual tuition costs – or $3,190 in today’s money.¹ Compare that to the 2017-2018 average of $9,970, and it’s easy to see how students struggled to afford an education without loans. The reason behind the price hike is multi-factored, but funding cuts are part of the equation. Between 1988 and 2018, state and local funding for higher education per student decreased 25%.² Often, colleges passed on the difference in cost to students by increasing the price of tuition at their institutions. 
• College attendance rates. Millennials are the most educated generation (a title they’re expected to relinquish to Generation Z in time). In 2016, 40% of millennial workers had a bachelor’s degree, compared to 32% of Gen Xers in 2000 – and 26% of baby boomers in 1985.³ It stands to reason that more people attending college would equal more loans in the pool as well, and that’s exactly what happened. 
• Stagnant wage growth. While wages have increased 67% since 1970, the rise isn’t high enough to keep up with the inflated cost of living.⁴ With fewer earnings after entering the workforce, millennials may not have had enough money to make a significant dent in their student loan debt. 

This ties back into inflation and rising rates for two reasons. Millennials who took out private student loans with a variable rate will see their monthly payment increase during a rising rate environment. And if the higher cost causes them to miss a payment altogether, the ‘oops’ moment will have a negative impact on their credit and their budget (due to late fees).  

2. Housing

Rent prices in Cincinnati are increasing at a faster rate than all 50 of the U.S.’ most populous cities. With a 39% year-over-year increase, the median gross rent in Cincinnati rose from $760 in 2020 to a whopping $1,815.⁵ 
But rental properties aren’t the only type of housing that’s getting pricier. With the average age of first-time homebuyers currently at 33-years old, millennials are at the age many people start considering homeownership. While demand, low inventory, and bidding wars made this difficult to accomplish in recent years, today’s rates will make borrowing more expensive – especially as the Fed continues hiking them up. 

This equals potentially higher monthly payments on mortgage loans. While this might not necessarily price every millennial out of homebuying, it’s poised to make it more expensive for them to do so. 

• Tip: A General Electric Credit Union (GECU) team member can help you better understand how the economy may influence your decision when considering different mortgage loan types. Use our appointment scheduler to skip the lines at your next in-branch appointment. We’ll match you to the best option depending on your risk tolerance, needs, and goals. 

3. Marriage and family

While fewer people are choosing to get married compared to previous generations, the average age to get hitched is around 29-years old for women and around 30-years old for men.⁶ Again, this puts millennials smack dab in the middle of a significant – and expensive – life event during a volatile economy.

Though there are many cultural factors that have caused the price of weddings to balloon over the past few decades, inflation is putting even more pressure on the wallets of couples walking down the aisle. In fact, they can expect to shell out $2,316 more than they would have in 2019.⁷

In the U.S., the average age of first-time mothers is 26. Unsurprisingly, this number has been skewing older in recent years. The financial cost of raising a child is a top factor in this and resulted in millennials having fewer children or skipping parenthood altogether. For those who plan to or are currently raising kids, they can expect to spend $230,000 doing so – a figure inflation has likely increased in categories like food, school supplies, and childcare services.⁸  

The silver lining 

Millennials don’t have to let inflation and rising rates sour all these amazing and rewarding life events. There are many accounts that can be used to strategically take advantage of rising rates. These include: 

• Certificates. Growing money with a certificate⁹ is a smarter way to save. Open one with an initial deposit, let it accrue interest for a set period, then withdraw or reinvest the funds once the certificate reaches the end of its term. No risk and higher rewards give Credit Union members an edge during inflation. 
• Interest-earning saving accounts. An interest-earning savings account allows accountholders to earn off their balance while keeping their money accessible. A tiered account equals higher earnings on bigger balances, rewarding accountholders for using them as a primary savings account. Tip: Start earning on as little as $100 by opening a Thrive Money Market¹⁰ account with General Electric Credit Union (GECU). 
• Individual Retirement Account (IRA) high-yield savings. An IRA high-yield savings account combines the stability and liquidity of a traditional money market account with the tax advantages of an IRA. Guaranteed, competitive earnings and low risk.  

Millennials are taking big steps every day. And now they can grow their money and make their finances easier to manage with GECU’s certificates and Money Market accounts. Putting these accounts in reach by becoming a member is easy. Anyone who lives, works, worships, or attends school in select Ohio, Kentucky, and Indiana counties is eligible.