How the Financial Crisis Affected Millennials



For Millennials—those born between 1981 and 1996—the real estate collapse and subsequent financial crisis and then the COVID-19 pandemic had a lasting impact that still reverberates, and some millennials may jokingly think they have no future.

The 2008 economic meltdown known as the Great Recession and the ongoing coronavirus pandemic, which began in early 2020, some 12 years later, both made a lasting impact on Generation Y, otherwise known as millennials.

If you are a member of the generation that came of age during the late 2000s, you may find it difficult to weather mercurial stock markets or a bloated housing market without concern. World events have shaped millennials ' financial outlook when managing their money, paying off their debts, and even how they save, spend, and invest.

Key Takeaways

  • The Great Recession has had a lasting effect on millennials, including fewer jobs available, decreased savings, and a reluctance to purchase homes.
  • The oldest millennials are heading into their 40s in 2022.
  • Millennials are buying homes at a fast rate compared to other generational groups.
  • Many millennials graduated at the height of the 2008 financial crisis, leaving them with high levels of student loan debt.
  • The COVID-19 pandemic impacted millennials' ability to save more, but it gave them more freedom from desk jobs as companies went remote.

Employment After the Great Recession

After the coronavirus pandemic, which upended financial and housing markets, it's almost hard to recall exactly how scary the economic news was back in 2008. A sudden downturn in the real estate market shook not only homeowners but the myriad Wall Street firms that had heavy exposure to mortgage-related assets. Investment bank Lehman Brothers filed for bankruptcy, JPMorgan bought out a struggling Bear Stearns at fire-sale prices, and insurer AIG needed a government bailout to stay afloat.

As more and more bad news emanated from the financial sector, the stock market went on to lose more than 50% of its value between its 2007 peak and the spring of 2009. It didn’t take long for the turmoil in the financial sector to spill onto Main Street. By 2010, the resulting abrupt cutback in consumer spending caused the labor market to shed nearly 9 million jobs.

That was the dreadful scenario in which many “older” millennials started looking for work after earning their college degrees. Many were unable to find employment, at least for some time.

For those ages 16 to 24, the unemployment rate surged by nearly eight percentage points between the fall of 2007 and the fall of 2009, reaching a high of 19%. For other age brackets, the jobless rate rose slightly over 5% during the same time period. Just when college grads thought they’d be starting their careers and laying the foundation for their eventual retirements, the crisis pulled the rug out from under their feet.

Figure 1. Following the financial crisis, the unemployment rate increased more sharply for millennials—many of whom had just graduated from high school or college—than for older age groups.

Source: Advisor Perspectives 

Graduating With Debt

It didn’t help that those graduates left school with a pile of student loans the size of which their parents’ generation never had to confront. According to the Project on Student Debt, roughly two-thirds of college students in 2008 graduated with student loan debt, with an average initial balance of $23,200 (as of 2022 even higher). In 1996, it was only 58% borrowed to finance their education, and their average debt load was $13,200.

Since the recession, employment prospects have improved, slowly but surely. In January 2022, the seasonally adjusted unemployment rate among Americans ages 25 to 34—in other words, those right in the middle of the millennial generation—was 4.3%.

Although a shortage of jobs affected every segment of the workforce after the housing bubble burst, younger adults were hit harder than most.

Lower Savings

However, those years of struggling to find work after the downturn, along with hefty student loan bills, have taken a toll on this generation's ability to build wealth. Twenty-one percent of millennials in 2020 did not have access to an employer-sponsored retirement plan. Millennials who are investing in their retirement accounts are opting for a more conservative approach that offers little opportunity for long-term growth.

Some experts believe the Great Recession, along with the collapse of the dotcom bubble a few years before it, has a lot to do with that risk-averse approach. For some economists, that’s not particularly good news for the broader economy. J.H. Cullum Clark of Southern Methodist University, for one, argues that a lack of wealth results in fewer people starting businesses and raising the next generation of workers, both of which could restrain long-term financial growth.

Buying a Home

While previously homeownership among millennials was down in 2018, home buying went up in 2020 for millennials. According to an annual report from the National Society of Realtors (NAR), young millennial buyers (ages 22 to 30) and older millennial buyers (ages 31 to 40) made up 37% of homebuyers in 2021.

In addition, many millennials are purchased their first home. Young (82%) and old millennials (48%) made up more first-time buyers than any other age group, according to the NAR report.

Are Millennials Buying Houses?

As a demographic, millennials are buying homes. The National Society of Realtors (NAR) reported millennials made up 37% of all homebuyers in 2021.

Did the 2008 Crisis Hurt Millennials?

Millennials' formative years were impacted by the Great Recession for many reasons, including graduating into a terrible job market.

Do Millennials Have Student Debt?

Like many Americans, millennials have heavy college debt, in fact, two-thirds of millennials graduated in 2008, with student loan debt, according to the Project on Student Debt.

The Bottom Line

Unlike older generations who experienced relatively long periods of economic stability at some point in their lives, Millennial Americans, in their formative years, have been shaped by three financial calamities: the implosion of the dot-com bubble and the financial crisis of 2008, and the coronavirus pandemic. These events are still having an effect on how millennials make important financial decisions.

Article Sources
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  1. Pew Research Center. "Defining Generations: Where Millennials End and Generation Z Begins."

  2. Experian. "Millennials' Student Loan Debt Continues to Rise."

  3. U.S. Securities and Exchange Commission. "Lehman Brothers Holding Inc. Announces It Intends to File Chapter 11 Bankruptcy Petition; No Other Lehman Brothers' U.S. Subsidiaries or Affiliates, Including Its Broker-Dealer and Investment Management Subsidiaries, Are Included in this Filing."

  4. U.S. Department of the Treasury. "Treasury Notes -- INFOGRAPHIC: Overall $182 Billion Committed to Stabilize AIG During the Financial Crisis Is Now Fully Recovered."

  5. U.S. Securities and Exchange Commission. "JPMorgan Chase and Bear Stearns Announce Amended Merger Agreement and Agreement for JPMorgan Chase to Purchase 39.5% of Bear Stearns."

  6. MacroTrends. "Dow Jones -- DJIA -- 100 Year Historical Chart."

  7. U.S. Bureau of Labor Statistics. "Employment Loss and the 2007–09 Recession: An Overview."

  8. U.S. Bureau of Labor Statistics. "Great Recession, Great Recovery? Trends from the Current Population Survey."

  9. The Project on Student Debt. "Student Debt and the Class of 2008," Page 1.

  10. U.S. Bureau of Labor Statistics. "Household Data, Seasonally Adjusted, A-10. Unemployment Rates by Age, Sex, and Marital Status, Seasonally Adjusted."

  11. Transamerica Center for Retirement Studies. "Living in the COVID-19 Pandemic: the Health, Finances, and Retirement Prospects of Four Generations," Page 28-29.

  12. The National Association of Realtors. "2021 Home Buyers and Sellers Generational Trends Report."

  13. The Project on Student Debt. "Student Debt and the Class of 2008," Page 1.

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