Many people sympathize with Millennials. After all, they were dealt a hard deck financially. They have less financial stability than their parents and were forced to start their adult lives with massive student loan debt. Many thought that would handicap them before they could begin to build wealth. What worsened things was that they entered the market during a bad economic downturn.
Things may finally be looking up for millennials, but as you will see, that financial upturn and sudden wealth surge is unevenly distributed.
New Data Suggests that Millennials Have Recently Come Into Wealth
New studies and surveys in 2022 suggest that Millennials may be wealthier than their parents were at the same age. Researchers recently analyzed a study, Survey of Consumer Finances (SCF) (done in 2022.) They were shocked to discover that both older and younger millennials’ wealth quadrupled between 2019 and 2022.
The Findings Seem to Buck Recent Trends
Millennials bought into the centuries-old thought that a college degree would guarantee a good job and a bright economic future. So, they took out staggering debt in the form of tens to hundreds of thousands of dollars to afford college and post-graduate degrees.
Unfortunately, they entered the job market right after the great recession of 2008. Consequently, the higher-paying and stable jobs that they had been promised were virtually non-existent. However, many millennials bought houses before the pandemic and the equity in those homes has gone up exponentially. That accounts for their sudden and dramatic increase in wealth.
The only issue is that since most of this wealth isn’t liquid, it can’t be easily converted to cash. Cash-strapped millennials could benefit if they could convert that wealth into cash to pay for daily essentials like gas and groceries. That may explain why millennials feel poorer than ever, though their net wealth has suddenly skyrocketed.
Inequality is the Norm for Millennials
Millennials may collectively quickly be becoming a wealthy generation. The issue is that the wealth is not distributed evenly. The richest 10% of millennials have 70% of generational wealth. While the poorest half of millennials have 2% of wealth. So, many millennials are genuinely much poorer than their parents were at a similar age.
Wealth is unevenly distributed by race as well. As of 2019, Anglo-American families had a median wealth of $88,000. The wealth for Latino and African-American families was $22,000 and $5,000 respectively. The main reason for this disparity is that minorities have to borrow more student loans than their Anglo and Asian counterparts because their families are poorer.
Consequently, minority millennials may be forced to live with their parents and other relatives for longer to pay off their student loans and save enough to be able to afford the down payment on a house. More and more millennials are choosing not to have kids. But the ones who do become parents often have to deal with paying for costly child care. That’s further compounded by the scarcity of high-paying, wealth-creating jobs.
Some millennials get lucky and can access government programs that make buying a first home more affordable. However, that type of help is still a distant dream and luxury for most millennials.
401K Plan Money Buoys Millennials Financially
Millennials have contributed to 401K plans since they started working. Perhaps it’s because they realized that Uncle Sam wouldn’t fund their retirement through social security payments. It also may be because, unlike previous generations, Millennials could choose to automatically enroll in 401K plans through their employers.
Millennials have an average of $62,000 stashed away in 401K plans. But since that’s an average, many have much more in retirement savings.
There is a Silver Lining for Millennials
Since many millennials have wealth in home equity which tends to stay stabilize and often, even grow over time, they have wealth that they can tap into should they fall on hard times financially later in life. Their 401K plans operate off of the same logic. So, millennials could well watch their wealth grow exponentially over the next few decades. That would be a welcome sigh of relief, given the hard set of cards they were dealt with financially when they began their careers.