3 Things Millennials Won’t Be Able To Afford in Less Than a Decade

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The cost of living continues to rise. In the past decade alone, the cumulative inflation rate was 33% with an average inflation rate of 2.92%. Wages, however, haven’t always kept up with rising costs.

Some everyday services and goods, including major purchases like real estate, have also become disproportionately expensive compared to others, making them far less affordable even today.

For millennials, most of whom are in the early to middle stages of their careers, this has become a very real — and very expensive — problem. If costs continue to rise as they have, some experts believe this generation won’t be able to afford certain things in another 10 years.

Here are three things the average millennial won’t be able to afford in less than a decade unless they take some key steps now.

Real Estate

The cost of housing has risen rapidly over the decades. Younger millennials especially often find themselves needing roommates just to afford housing costs.

According to a Pew Research study from a few years ago, 32% of adults share their living space with another adult who isn’t their spouse, partner or young adult child.

Both rental and purchase prices are exorbitantly high in many parts of the U.S. The average 901-square-foot apartment rental costs $1,748. The average home sales price in Q3 2024 was $501,100.

Millennials who want to buy property can expect prices to continue going up in the coming decade.

“Home prices are expected to keep rising, especially in urban areas where demand outpaces supply,” said Antwyne DeLonde, a former financial advisor and discretionary portfolio manager. “Interest rate hikes further complicate affordability.”

According to Yahoo Finance, home prices are high thanks in part to inventory shortages in many parts of the country. The house price-to-income ratio, which calculates the median household income alongside the median home value, has also risen disproportionately over the past few decades.

Healthcare

Healthcare and medical expenses are another big financial problem for millennials. This is nothing new, but it could get worse in the coming decade if history’s anything to go by.

According to the Peterson-KFF Health System Tracker, the total health spending was $74.1 billion in 1970. It was $1.4 trillion just 30 years later. By 2022, the total health spending had risen to $4.5 trillion, though some of this rapid increase was due to the COVID-19 pandemic.

Breaking this down further, the average annual growth rate of health spending in the 2010s was 4.8%. Taking this as a baseline, health-related expenditure is likely to increase more quickly than the average inflation rate and, more concerningly, the typical wage growth.

“Healthcare costs continue to outpace inflation,” said DeLonde. This makes “it crucial to plan for higher premiums and out-of-pocket expenses.”

Higher Education

And then there’s higher education. The average annual cost of higher education in the U.S. was $35,248 for the 2022 to 2023 academic year (private four-year institution). A decade prior, it was $26,739.

In comparison, the national average wage index in 2014 was $46,482. It was $66,622 just 10 years later.

That’s a $20,140 increase in wages, and $8,509 increase in annual tuition costs. While wages have risen more rapidly, this doesn’t necessarily make higher education costs more affordable, especially when you also account for things like administrative fees, application fees, books, and room and board.

“For millennials with children or those seeking advanced degrees, education costs will remain a challenge,” said DeLonde.

Ways to Get Ahead

Even with rising costs, there are still ways for millennials to get ahead and ensure they can afford these and other necessities in life. Here are some tips from DeLonde:

• Use tax-advantaged accounts like health savings accounts (HSAs): “HSAs aren’t just for medical savings; investing those funds can help them grow substantially over time,” he said. “Similarly, contributing to 401(k)s, IRAs and 529 plans can offset rising costs.”
• Get strategic with your investing strategy: “Early and consistent investing, even in small amounts, can provide a financial cushion for unexpected expenses and combat inflation,” he said. If you’re trying to save up for your child’s education, a 529 plan or something similar could help.
• Brush up on your financial literacy: “Understanding tools like HSAs, investment strategies and budgeting apps can empower millennials to make smarter decisions,” said DeLonde. You can also stay informed about tax credits, student loan forgiveness programs and other forms of financial relief.
• Improve your credit now: If your credit score needs work, now’s the time to start building it up. Good credit often means lower interest rates for those mortgage, auto and other loans.

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