The Alarming Wealth Deficit Among Millennials vs. Previous Generations

Courtesy of The Washington Post. Image Source: Federal Reserve Distributional Accounts

This article by Christopher Ingraham does a great job of illustrating the perhaps alarming statistic of how each generation accumulates less and less wealth versus their older-generational peers of the same age, in particular the millennial generation. 

The article defines what wealth is, which can also be called net worth. Christopher makes the point that the importance focusing on the overall wealth of an entire generation cannot be overstated, as this is what the entire economy and framework operates on in our society. 

This chart shows the average wealth by age for the baby boomers, generation X, and millennials, and how far behind millennials are in accumulating wealth versus the previous generations.

The data from the chart shows:

  • Baby Boomers – born between 1946 and 1964 – collectively owned 21 percent of the nation’s wealth by the time they hit 35 on average.
  • Generation X – born between 1965 and 1980 – collectively owned just 9 percent by 35.
  • And Millennials – born between 1981 – 1996 – have not on average reached 35 yet, but will reach it in 2023, but you can see in the chart how far behind this generation is. Currently millennials have just 3.2 percent of the nation’s wealth.

Christopher makes the point that while the population count of each generation is not the same size, the situation is still dire. He also notes that due to the mechanics of compound interest: the less money you start out with, the less you’ll make during the rest of your life. 

While many of the baby boomers will pass on their wealth to their heirs, many will not benefit from that at all, putting strains on younger households and into the future.

Our Take:

This is, in part, shows why it’s more important now than ever to learn about finance, monetary systems and cycles, and to look at adjusting the way we operate in our own life so that we can get ahead of these trends.

If you’re a millennial and feeling a sense of hopelessness, do not give up. This is a time to double-down, keep educating yourself, and keep working at adjusting things to set yourself on the path that you want for your life.

While you do need to focus, work hard, chip away at your debt, and all those other things, history usually repeats itself. The technical term used sometimes is “mean reversion“, whereby all these crazy high prices (December 2019) in stocks, housing, and cost of living usually come back to earth to balance out through a number of ways. This could be through either increasing money saved (after expenses and taxes), such as tax cuts, tax credits, or increased wages. Or it could mean that asset prices fall to reflect historical ratios, if incomes and savings don’t rise.

When you are on solid ground, armed with knowledge, have relatively low debt, and hopefully some cash, you will be positioned to take advantage to move ahead in wealth accumulation like the previous generations. And as with anything really worth doing, it will require some sacrifice, but will arguably be much more rewarding in the long run.

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