Did 9/11 make millennials less wealthy?
September 11, 2001 was a formative day for many American millennials. But did it impact how they manage their money?
Michael Froggatt, now 38, had just started his freshman year at Millersville University in Pennsylvania when he, like millions of Americans, watched on television as the second plane hit the South Tower of the World Trade Center on the morning of September 11, 2001.
“I remember it very clearly. I was getting ready for class in my dorm, watching the reaction on TV and then the second plane hit,” Froggatt told Al Jazeera. “Later in class, my professor looked really shaken, and confirmed for all of us that this day would change the world in a horrible way.”
Kristin Buhagiar, who was 18 and living in Irvine, California at the time of the attacks, said her mother woke her up screaming.
“I was asleep and woke up to my mom screaming ‘Wake up! Our country is under attack!’. I didn’t quite understand what was happening until I walked downstairs, saw the TV, and watched in horror as the second plane crashed,” Buhagiar told Al Jazeera.
Millennials, the generation born between the early 1980s and the mid-2000s, were young adults, teens and children as they watched the collapse of the World Trade Center towers and the death of thousands of people on live television.
But did the trauma make millennials more risk averse and therefore less financially well-off?
Some economists say ‘yes’, although they add that it is difficult to quantify how.
“Disasters do make people more risk avoidant in their choices,” Karna Basu, an Associate Professor of Economics at Hunter College and The Graduate Center at the City University of New York, told Al Jazeera.
“This could be partly because people become fundamentally more aversive to risk, and partly because they now think the possibility of a future disaster is higher. Both these effects could indeed be subconscious,” he added.
With the world looking less secure, millennials might have been inclined to take measures such as maintaining precautionary savings that they otherwise could have invested into riskier assets like real estate or the stock market.
“I felt an uncertainty that I hadn’t felt before,” Buhagiar said. “What was going to happen next? Was this the first of many attacks? I was scared. I have never equated this uncertainty to my spending habits, at least on a conscious level. But perhaps it has been a factor. I can’t say either way with any certainty.”
Economic reasoning can help us organise thoughts about how disasters may affect behaviour, says Basu, though he did point out that most of the body of research conducted on financial risk aversion and risk-taking behaviour focuses on the impact of natural disasters such as earthquakes and floods or the loss of a child.
Disasters do make people more risk-avoidant in their choices.
Basu also underscored the difference between risk aversion and risk-taking behaviour. The former is a description of people’s preferences (i.e. what their fundamental attitude towards risk is), while the latter is a description of the choices people actually make.
“These choices are determined not just by our risk aversion, but also by our view of the world, our predictions for the future, and our guesses about the probability of future disasters,” he told Al Jazeera.
Froggatt, who was in his first week of college on 9/11, says that while that event was the most remembered, it was not the only tragedy that shaped how millennials view the world.
“Millennials not only dealt with 9/11 but the aftermath: the war on terror. Suddenly, we were told everyone hated us for wars and conflicts started by previous generations. On top of that, at home we were dealing with school shootings, taught to hide under our desks. We literally became a fearful generation,” he said.
Generational wealth gap: ‘We’re standing outside looking in’
Millennials are known for postponing major life milestones such as buying a house, getting married and starting a family.
Families of those born in the 1980s and 1990s have less median wealth than previous generations at the same time in their lives, according to the Federal Reserve Bank of St Louis.
“Younger families today simply have less wealth than younger families did in the past, while older families today have more wealth than older families did in the past,” Ana Hernández Kent, senior researcher for the Institute for Economic Equity at the Federal Reserve Bank of St Louis, told Al Jazeera.
Millennials grew up in a world quite different from that of the white-picket-fence ideal of the Boomer generation – those born into the prosperous and social-safety-net era after World War II.
Younger families today simply have less wealth than younger families did in the past.
Older millennials, those in their mid-to-late 30s and this year turning 40, who grew up in the era of mass school shootings and came of age against the backdrop of 9/11 and the US “war on terror”, were dealt another whammy just as they were graduating from college with unprecedented levels of student debt.
The Great Recession of 2007-2009 left the stock market, real estate – and, most importantly for millennials, the jobs market – in utter disarray.
And now another cataclysmic event may lock many millennials out of growing their finances. Since March 2020, stock and housing prices have experienced a historic rally as the coronavirus pandemic ravaged the US.
Those who were positioned to take advantage of swelling asset prices have seen their wealth grow. For those who weren’t, it is yet another economic hurdle with lifelong consequences, Hernández Kent told Al Jazeera.
“This could make it more difficult for them to invest large amounts of money in the stock market or buy a house. These assets have appreciated rapidly in recent months, which is advantageous if you already have those assets, but makes it difficult to acquire them if you don’t,” she said.
And millennials have yet to experience a decade without any major political or economic upheaval.
“We’re the first generation since the 1900s to deal with mass death on US soil, from 9/11 to the epidemic of gun violence and now a global pandemic,” Froggatt said. “Of course, we’re cynical about investing because we’re standing outside looking in.”