Personal finance guru Dave Ramsey has a lot to say about the nearly half of young adults who are still living at homeâa level that hasnât been this high since the Great Depression.
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 Zâs and younger millennialsâ 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.
âSo, let me get this straight. You live in your mommaâs basement, but you got a Coach purse,â Ramsey said. âHereâs whatâs going to happenâyou cannot avoid life, itâs coming for your butt. Momma canât protect you.â
Saying the trend will result in a âtrain wreck,â Ramsey blames not the young adults but their parents for âout of controlâ helicopter parenting and âcoddling.â
âThe problem is youâve got debt; youâre not earning enough money; and youâre not doing enough to go out and change it,â cohost Jade Warshaw added. âMom and dad canât do this for you.â
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 didnât respond to request for comment.)
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 didâif they even partook in these life milestones at all.
âItâs almost like we donât want millennials to get a piece of the American dream,â AndrĂ© Perry, a senior fellow at the 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 theyâll be able to save enough for retirement and 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 head. 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.
Itâs proof that living at home with parents can be financially beneficial. âThis should not necessarily be viewed as a negative thing as long as there are clear fiscal goals in place,â 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 are 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 themselvesâafter 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 thatâs the case for those living at home, that doesnât mean theyâre also not socking money away. It also doesnât 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.
:citations-needed: literally everything is just price gouged and labelled âluxuryâ now
Having clothing, appliances or anything else not constructed out of tissue paper particle board is a luxury. You will sleep on the broken Ikea bed. You will buy new pants every single month because they last three washes.
This is absolutely a factor I hadnât even considered: a lot of people including myself these days buy âluxuryâ goods because the âluxuryâ part basically means its not constructed like complete shit and will last (IE, its an investment). I own like 6 pairs of these pants:
https://outlier.nyc/collections/pants/products/futureslimworks
You know why I own them instead of khakis from wallmart? SureâŠin part its cause they look nicer but also: -They breath incredibly well in the hot texas sun. -They stretch nicely. -They repel water and staining (Iâve litterally soaked them in blood and salvaged them). -And theyâre goddamn durable. Iâve had them for almost 8 years at this point I think.
Luxury can often just mean a dumb branding but it can actually mean cost effective as well at times.