Top 5 Disruptive Cultural and Financial Seismic Shifts

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These are the top five disruptive cultural and financial seismic shifts:

1. Education is changing radically.
2. Finance and investing are confusing.
3. Saving money is difficult.
4. Assets are unaffordable.
5. Debt has become excessive.

Post-High School Education

Four-year bachelor’s degrees (BS or BA) and graduate-level programs may provide a broader education but with theory-based courses. Community colleges are far more affordable. The average annual tuition at a two-year school in the United States is around $2,500, while a four-year university can cost significantly more. Cost of a four-year degree in the United States averages $30,031 per year, including tuition, fees, room, and board.

Recent college graduates often carry nearly $30,000 in student loan debt, so a 10-year standard repayment plan would result in a monthly payment of around $300. If you have federal student loans, the average monthly payment is estimated at about $503.

There are, though, skills-based and lower-cost alternatives. If, for example, you have a specific career path in mind (e.g., public service, plumber, electrician, architect, software), community colleges can prepare you for it. Community colleges offer two-year degree programs (associate degrees) and professional certificates. Focus is more upon the practical, hands-on education.

Do-It-Yourself Education and Employer-Assisted Education

• Skillsoft—A global leader in corporate digital learning, Skillsoft provides enterprise learning solutions. Although it primarily focuses on workforce development, it might have entry-level positions or apprenticeships for recent high school graduates.
• InStride—In collaboration with academic institutions, InStride enables employers to provide career-aligned, debt-free education. While not specifically hiring high school graduates, it offers educational opportunities through its platform.
• Edmentum—This education technology company provides products and services to school districts across the United States. It offers various remote education jobs, including roles related to online learning platforms and curriculum development

Finance and Investing

Retirement planning is difficult since the event seems so far off. Young people are trying to put money away, but more and more simply don’t have the discretionary cash flow to build up their own nest egg and to take advantage of time and compound interest.

While traditional wisdom suggests that a house is a good investment, the combination of high prices and high mortgage rates is shutting out a larger and larger proportion of young people who have no choice but to rent instead.

As for college, we covered the choices earlier that may include much less expensive alternatives rather than the traditional four-year degree path. Instead of risking your savings in stocks and bonds, consider certificates of deposit (CDs), high-yield savings accounts, or money market funds. Keep it simple. Keep it safe. And take advantage of any employer matching contributions if they offer a 401(k) plan!

Many young people don’t have a good appreciation or a handle on the concept of risk. Risk assets soared with the flood of liquidity from monetary and fiscal authorities during the pandemic. Thus, everything went up in value. But these inflated investments will deflate just as fast as now the debt must be serviced and reduced.

Importance of Saving

Young people face challenges when it comes to saving for retirement. According to the Survey of Consumer Finances, in 2022, nearly half of American households had no savings in retirement accounts. In 2022, about 46 percent of households reported savings in retirement accounts.

Financial planners recommend setting aside at least 10 percent of income for retirement, but workers under the age of 34 are putting away just 5.5 percent on average. About 66 percent of people between the ages of 21–32 have nothing saved for retirement.

Employers have shifted away from defined benefit plans (pensions), putting more responsibility on workers to plan for retirement. In 1989, half of working households ages 50–60 had a defined benefit plan; by 2022, only one quarter did.

Remember, starting early and consistently contributing to retirement accounts can make a significant difference over time. Even small contributions add up, thanks to the power of compound interest!

Assets Out of Reach

Both new and used car prices rose to record highs during the pandemic, as the car industry was experiencing supply-chain disruptions and chip shortages. Since 2020, new car prices have risen by 30 percent, according to data shared by AI car shopping app CoPilot with Newsweek. Within the same timeframe, used car prices have jumped by 38 percent. In 2023—a year during which inflation slowed down to the point that the Federal Reserve decided to stop hiking rates—new car prices rose by 1 percent, to an average of $50,364.

According to a report by Market Watch, Americans need an annual income of at least $100,000 to afford a car, following standard budgeting advice, which says you shouldn’t spend more than 10 percent of your monthly income on car-related expenses.

Americans are living through a tough housing market, and for some young people the dream of owning a home is slipping away. Mortgage rates surged in recent years, hitting the highest levels in more than two decades, topping even 7 percent. Although rates have come down slightly recently, home prices remain painfully high. It’s taking nine years for the typical homebuyer to save up for the median down payment on a home with the median value in the United States, according to Zillow data. Such conditions mean that housing has become woefully unaffordable.

Is it possible this is a trend, and that younger people may finally find themselves completely shut out of owning assets, leasing and renting what they need to survive instead?

Debt Has Become a Problem

Nearly one in five adults aged 18–24 in the United States currently have debt in collections. Young adults face high-interest debt due to limited financial resources, lower wages, and shorter credit histories. Young adults are particularly vulnerable due to the high cost of borrowing, coupled with limited income, making it difficult to manage debt during this stage of life.

Overall, credit card balances are surging, with an annual jump of 15 percent in the most recent quarter. Credit card rates are now over 22 percent, on average, and still rising. Yet even college students are receiving unsolicited preapproved credit card offers. These folks are increasingly turning to buy now, pay later payments. A seemingly attractive alternative to credit cards are “buy now pay later” products which offer quick credit approvals and little to no interest.

Summary

These are significant cultural and financial shifts in America today, with the first generation ever to experience a falling standard of living compared to their parents. If we finally get that oft-threatened recession, many of these austerity-oriented approaches to living will become even more difficult for those who are just getting started in their working careers.

The Epoch Times copyright © 2024. The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.