Preparing for Launch
Youthfully employed, rent-free & stacking cash.
With the median age of a 2025 homebuyer (56) now well beyond the AARP qualification age (50), one begins to wonder if the next gen is having a difficult time keeping up. But things are not always as they seem. It is logical to posit that younger generations are just hesitant to buy a new home as they delay starting families.
The average age of new parents has steadily moved older over the past several decades, shifting the new home buying experience dangerously close to the mid-life crisis stage of life. Further skewing the median home buyer age is the trend among 50+ opting to move out of multi-story homes bought before their knees blew out of their sockets.
Notice the correlation between knee replacement demand and the median age of a new home buyer. “Correlation does not equal causation”, argue the data scientists that have never had a knee operation.
Enough charts. The point is young people are not buying homes like they used to. The chronically pessimistic, always online keyboard warriors argue that this is because the “housing market is unaffordable for young people, waaahhh!”.
Strangely, I can still find affordable starter homes and I frequently encounter young people who have positioned themselves quite well financially. Housing is certainly less affordable than it was during the golden decade (2010 – 2020), but this is a return to normal.
Let’s garner some perspective here:
The golden decade started with the first housing collapse in American history, negative real interest rates and a persistent economic recovery.
Housing prices are about where they should be given demographics, supply and interest rates. Late millennials and Gen Zr’s with influencer-level living aspirations are having a tough time reconciling expectations with reality.
"Life is never fair, and perhaps it is a good thing for most of us that it is not." - John F. Kennedy
Fortunately, most of the young people I encounter are not represented by pop culture. They are energetic, hungry for direction, enthusiastic about learning and their futures. And they are saving.
Our children are launching much later in life, and this is to be expected. The complexity of vocation has increased alongside demand for specialization, the necessity to acquire a deep knowledge set or expertise.
It’s possible to form and sustain a household on a bartender’s earnings but eventually the laws of economics overpower any remaining enthusiasm for double shifts. Gravity always wins. Many of the young people today choosing to live with mom and/or dad are demonstrating financial savvy, not a failure to launch.
Maintaining minimal cost of living while tooling mind, body and balance sheet for a meaningful career is as critical for a young person as clear skies is for SpaceX. Parents, it’s ok to let your kids live rent free so long as it is part of a career plan, not a young adult daycare experience.
A clear sign that things are heading the right direction with junior is whether their bank account balance is growing. Eventually, they might have more in their checking account than you do.
A question I frequently get is, “Ben, what should my progeny do with all the money they have in their checking account?” Frequently coupled with a sense of bewildered pride. The usual ‘financial advisor’ response goes something like, “Open a Roth IRA! Everybody knows young people need Roth IRAs!”
But I like to subvert expectations with my real-world street smarts and happen to be a young person at heart. A Roth IRA may be the best option but it’s likely that your launchpad child needs much more flexibility than a retirement account affords.
Not too many 20 somethings relish the notion of saving money for some ambiguous goal 40 years into the future when they only have a tenuous grasp on the next twelve months.
But they shouldn’t just leave the money in a checking account – that is just madness. This would be an appropriate opportunity to introduce your young adult to a more comprehensive long-term solution.
It is possible to link a traditional checking account with a brick-and-mortar bank or credit union to a high-yield online savings account or brokerage, but I prefer a consolidated solution many do not even consider.
While there are numerous options out there and this is by no means a comprehensive assessment of all of them, I have managed a dollar or two with success. I am partial to the full suite of cash management and investment services available at Charles Schwab and Fidelity.
Both firms offer high quality direct to consumer service experiences, consumer friendly cost structures and the option to plug into professional advice services when needed. Accounts can be set up through an advisor or directly online.
At the core is a brokerage account with a checking component. The checking functions just as any traditional bank checking with online deposit, debit card, ATM access and even bill pay. The brokerage is where the more interesting things can happen.
A good next step would be to purchase a money market fund to obtain a higher yield without compromising principal stability using excess savings within the brokerage. We go a step further and build fixed income ladders for clients seeking a bit more yield through direct access, but that would be something to adopt down the road.
You could even invest for longer-term goals and collaborate with an independent advisor for quality of life improvements. The point is flexibility, and they would have access to the funds for any reason at any time.
Ideal for a young person with more potential for major life changes over the next decade than the 5 decades that proceed it.
Investment advice offered through National Wealth Management Group, LLC.
The information presented is for educational and informational purposes only and is not intended as a recommendation or specific advice.