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‘Financial nihilism:’ When long-term planning feels pointless
It’s a term coined early in the pandemic but one that really entered the cultural conversation in December, when the Wall Street Journal ran a widely discussed essay by author Kyla Scanlon: “Why My Generation Is Turning to ‘Financial Nihilism.’”
“Financial nihilism” describes, in Scanlon’s phrase, “the sense that the economic system no longer rewards prudence or long-term planning,” and it’s becoming a catch-all explanation for a basket of risky financial behaviors like crypto, sports betting, prediction markets and active trading (see “meme stocks”) that are more prevalent among younger adults.
Financial services giant Northwestern Mutual focused on “Signs of Financial Nihilism” in one section of its annual “Planning and Progress Study,” released this month. The study found that 73% of all adult respondents who make higher-risk financial plays do it because they “feel financially behind and believe high-risk/speculative investments will help reach financial goals more effectively than traditional methods.” For Gen Z the figure is 80%.
The system is broken
Let’s stop to acknowledge: The system feels broken to many because, frankly, it is broken for many. At least, it doesn’t work the way it used to. Upward mobility is stunted. The job market is stagnant and entry-level jobs are scarce. Student debt is stifling.
On top of all that, housing prices and mortgage rates are sky-high — and homeownership rates are falling. I talked to Younggeun Yoo, one of the authors of a recent study called “Giving Up” (abstract) that mines home affordability and renter sentiment data and finds links to a host of financial behaviors, from saving to spending to investing. The study was cited in an article published this month by the World Economic Forum.
In their study, Yoo and co-author Seung Hyeong Lee (both are Ph.D. students in economics, at University of Chicago and Northwestern University, respectively) discover a threshold in renter sentiment data that divides those who feel a higher likelihood of owning a home someday from those who believe they will never own a home.
Those above the threshold are more likely to engage in “rational” financial behaviors (like saving, maximizing their income), while those below are more likely to engage in “risky” behaviors. In its pure form, “risky” essentially adds up to making a lot of small bets, in a variety of forums, in search of one life-changing windfall.
YOLO
Author Yoo describes the move to riskier behaviors as a mindset switch: “When they realize that just accumulating their wage is not enough to be able to afford the house they want to live in, they start to have a gambling motive,” he says. “So let's buy this crypto. If it goes north, I'll be able to buy the house I want. If it goes south, well, I wasn't gonna be able to buy a house anyways.”
Here’s the kicker: After 10 years, according to “Giving Up,” those who felt some optimism about the ability to buy a home were in much better financial shape than those who were less optimistic, even if they started at an equivalent point financially, making the initial glass half-full/half-empty sentiment a bit of a self-fulfilling prophecy.
The takeaway: Those who work toward a financial goal — whether or not they achieve it — will do better over time than those who rely on chance. That doesn’t mean the world works as it should. And some will get rich on a gamble. But for most of us, working toward a goal will set us up to be more resilient financially, especially as the world keeps changing.
Also in the March 27 edition of MoneyNerd:
- Airfares are rising. Should you book now or wait?
- The Postal Service is going broke. What does that mean to you?
- Gas prices are up $1 since the start of the war. Will they keep rising?
- Vinyl record sales passed $1 billion in 2025 — and our writer helped.
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Your MoneyNerd team: Courtney Neidel, Anna Helhoski, Rick VanderKnyff.
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