Millennials: Now Wealthier Than Previous Generations—A Surprising Turnaround
Fifteen years ago, Andy Holmes was a recent college graduate grappling with the uncertainty of his financial future. Living with his parents, he was juggling low-wage jobs like mowing lawns and digging ditches, questioning if he and his peers would ever achieve the financial success of their parents’ generation. Fast forward to today, and Holmes is the Chief Financial Officer in Kansas City, Missouri, poised to retire at 52, a reality he could scarcely have envisioned back then.
“I’m in a place financially that I couldn’t have imagined coming out of college,” Holmes reflects. “At age 37, my net worth is closer to what I thought it’d be at 47.”
A Rapid Financial Shift
The financial landscape for millennials, those born between 1981 and 1996, has shifted remarkably in recent years. Data from the Federal Reserve Bank of St. Louis reveals that the median household net worth for older millennials, born in the 1980s, surged to $130,000 in 2022 from $60,000 in 2019. Meanwhile, millennials born in the 1990s saw their median wealth more than quadruple to $41,000.
This dramatic turnaround has positioned millennials, who were once criticized for lagging in wealth accumulation, home ownership, and other traditional markers of success, ahead of previous generations in some respects. According to an analysis by the St. Louis Fed, millennials and older members of Gen Z, as of early 2024, hold approximately 25% more wealth than Generation X and baby boomers did at the same age.
Ana Hernández Kent, a senior researcher at the St. Louis Fed and a millennial herself, has tracked this surprising shift. “They’re no longer lost,” she says. “They’re found.”
Surge in Wealth Accumulation
In the first quarter of 2024, the combined wealth of millennials and older Gen Z reached $14.2 trillion, a substantial increase from $4.5 trillion four years prior. A key driver of this increase has been real estate. Millennials’ housing wealth expanded by $2.5 trillion, accounting for the additional mortgage debt incurred. Home prices have surged, benefiting those who purchased properties in the early 2010s or just before recent price spikes.
Stocks and mutual funds have also contributed significantly to millennials’ growing wealth. Many millennials started contributing to retirement accounts earlier in their careers, bolstering their financial stability.
The Impact of Strategic Decisions
Two pivotal decisions set Andy Holmes on a path to financial success. Moving back home after college allowed him to save for a down payment on a house. His initial purchase in 2010 of a three-bedroom home for $90,000 has appreciated to around $300,000. Additionally, in 2017, Holmes invested a substantial sum in the stock market, which yielded significant returns. These investments, coupled with a lucrative job switch, enabled his wife, Megan Holmes, to leave her job and focus on their young children.
Similarly, Brent Royer, a 36-year-old accountant, benefited from a 40% salary increase in 2021, allowing him to indulge in his passion for skydiving. He has invested around $40,000 in the sport, illustrating a generational shift towards prioritizing personal passions and experiences.
Leisure Spending and Financial Security
A notable trend among millennials is their focus on leisure and experiences. Approximately 62% of millennials view vacations as a high priority, compared to 54% of adults overall. This preference reflects a broader generational outlook shaped by witnessing economic downturns, such as the 2007-09 recession, which emphasized the value of personal experiences over material wealth.
Phantom Wealth and Financial Anxiety
Despite overall wealth increases, many millennials experience financial anxiety. This is partly due to the nature of their assets, such as real estate and retirement funds, which can feel less tangible compared to immediate cash flow. The weight of substantial expenses like childcare, coupled with the memory of economic instability during formative years, contributes to a sense of fragility.
For instance, Becky Wang and Christian Hutchinson from Grosse Pointe Shores, Michigan, despite having stable jobs and nine rental properties, express a heightened fear of financial instability. This sentiment is echoed by Taylor Leary, a financial planner who notes that many millennials feel as though they are perpetually on the brink of financial upheaval.
Growing Inequality
While some millennials are thriving, wealth inequality within the generation has expanded. The wealth gap between the top 20% and bottom 20% of millennials was about $343,000 in 2022, compared to $286,000 for boomers in 1989. This widening gap reflects disparities in income and homeownership rates. For example, black millennials are half as likely to own a home compared to their white peers, and low-income Americans face significant challenges in homeownership and retirement savings.
The Future Outlook
Despite these challenges, millennials are positioned for long-term financial success. Higher educational attainment and fewer children contribute to their financial stability. Millennials are expected to benefit from rising retirement account values and improved access to workplace retirement plans, which could significantly enhance their financial security in the future.
Adam Chen and Margeaux Anderson from Denver, who have accumulated about $800,000 in retirement savings, exemplify this trend. Their commitment to living below their means and strategic saving positions them well for a comfortable retirement.
As the millennial generation continues to navigate financial challenges and opportunities, their experiences and strategies will shape the future of wealth accumulation and financial planning. The remarkable turnaround in their financial fortunes highlights both the progress made and the ongoing disparities that need to be addressed.