Millennials’ Net Worth Half As Much As Parents’ At Same Age

The term “Millennials” generally refers to those Americans born between 1978 and 1994, and the first generation to reach adulthood just before and after the turn of the century. Millennials are thought to include apprx. 78 million Americans, making this generation the largest in US history, as compared to Baby Boomers who are thought to have numbered apprx. 76 million.

Given that Millennials are the largest demographic block in the US, they get a lot of coverage in the media, as well they should. I follow this coverage very closely due to the sheer size of the Millennial generation, but also because I am the father of two Millennial children – our son being 26 and our daughter 24.

For reasons I admit I don’t clearly understand, Millennials tend to get a “bad rap” in the mainstream media. The media tends to characterize Millennials as lazy, unproductive and feeling that the world owes them something, just to name a few criticisms.

I don’t see that at all, but then I may be prejudiced because my two Millennial kids are very successful and hard working, as are most of their friends I have grown to know over the years. I have met a few Millennials who are lazy and unproductive, with bad attitudes, but they are definitely in the minority in the circles I move in.

Yet there is one area where Millennials have definitely fallen significantly behind their Baby Boomer parents when they were the same age. A new report last Friday, based on data from the Federal Reserve, found that Millennials’ net worth today is less than half that of Baby Boomers when they were the same age.

While Millennials were worth about $10,900 on average in 2013 (latest data available), the Boomers were worth $25,035 at the same age (inflation-adjusted). That’s huge!

The report also found that Millennials were earning about 20% less on average in comparison to young adults in 1989. While Millennials earned $40,581 on average in 2013, members of the Boomer generation earned $50,910 annually in 1989 when they were the same age (inflation-adjusted to 2013 dollars).

The lower number on the paycheck has been a major reason for Millennials’ much lower net worth.

These findings reveal that Millennials have been set back significantly, by not just the Great Recession but by decades-long financial trends, resulting in major generational declines in financial security between Millennials and Baby Boomers when they were the same age.

The question is, why? The answers aren’t entirely clear, but here are some reasons. The most obvious is the stagnation of wages and incomes over the last 20-30 years, as shown in the chart above.

Incomes earned early in one’s career often set the stage for lifetime earnings, with the highest growth occurring in the first decade of work. Entering the job market during an economic downturn, essentially starting on a lower rung on the economic ladder, projects lower earnings for today’s young adults throughout their working lives in many cases.

Likewise, experiencing unemployment also takes its toll on incomes later in life. By some estimates, the one million young adults who experienced long-term unemployment during the Great Recession will collectively miss out on $20 billion in earnings over the next decade, equaling $22,000 per person.

Another reason is the huge increase in college tuition and costs, which have skyrocketed in recent decades, making it harder for young people to go to college. It has also resulted in an explosion in student loan debt, which ballooned to over $1 trillion outstanding last year.

Yet another reason is the significant drop in the home ownership rate among Millennials. Owning one’s home is traditionally considered another cornerstone of the American dream, and is one of the primary ways to increase net worth.

Yet Census Bureau data show that less than half of young Americans own a home today, the lowest percentage level since records have been kept. Likewise, more young adults are living with their parents than ever before.

These are just some of the reasons why Millennials today have net worth on average of less than half what their Baby Boomer parents had at the same age.

I could launch into a political discussion at this point, about how liberal policies and politically-correct education have been largely responsible for this disturbing trend, but I will leave that for another day.