Millennials & Gen Z: The New Wealth Builders

Recent research shows that Millennials and Gen Z are financially outpacing Generation X when comparing wealth at similar life stages. According to a report by Jeremy Horpedahl, an economist at the University of Central Arkansas, the younger generations hold significantly more wealth than Gen X did at their age. 

Using data from the Federal Reserve’s 2022 Survey of Consumer Finances, Horpedahl highlights that by the third quarter of 2022, Millennials and Gen Z had a median generational wealth per capita of $118,279, compared with $52,752 for Gen X at the same point in their lives. 

Wealth Growth Trends 

Despite facing two major financial crises—the Great Recession and the COVID-19 pandemic—Millennials and Gen Z have managed to build wealth more effectively than previous generations. Millennials, born between 1981 and 1996, have amassed a total of $13.06 trillion in wealth, while Gen Z is rapidly catching up. Analysts predict that by 2030, Millennials could hold up to five times their current wealth, largely due to impending inheritances from Baby Boomer parents, a factor that could significantly reshape wealth distribution and societal dynamics in the U.S. 

A report by Cerulli Associates further underscores the rapid financial gains made by these younger cohorts. In 2021, Millennials and Gen Z increased their wealth by 25 percent, outpacing the growth rates of Gen X and Baby Boomers. This increase has been driven by investments in technology, alternative assets, and a focus on retirement accounts. 

Moreover, younger generations have embraced financial advice from unconventional sources, such as social media, with platforms like Reddit and X playing a pivotal role in shaping their investment strategies. 

Challenges to Homeownership for Millennials and Gen Z 

Younger generations have adopted different financial strategies than their predecessors. Unlike Baby Boomers, whose wealth was significantly driven by real estate, Millennials and Gen Z are more likely to invest in alternative assets like cryptocurrency and NFTs. Homeownership remains a challenge due to high housing costs and stagnant wages, which have driven many younger Americans to explore alternative means of wealth accumulation. 

A survey by Policygenius shows that only 20 percent of Millennials and Gen Z own real estate, reflecting the broader issue of housing affordability. However, these generations are leveraging other avenues, such as maximizing credit card rewards and experimenting with financial “hacks,” like no-spend challenges popularized by social media. 

The Future of Wealth Distribution in the U.S. 

Millennials and Gen Z are also poised to reshape the financial services industry. Financial advisors and firms are increasingly recognizing the need to cater to these tech-savvy investors. 

According to a Cerulli report, younger investors are more inclined to use online-only financial platforms but still value human interaction for personalized advice. The growing demand for financial advice among affluent young investors underscores the need for financial services to adapt and offer more holistic solutions. 

Despite their success in wealth-building, challenges remain for Millennials and Gen Z, particularly in navigating the rising costs of housing and education. Nevertheless, their ability to accumulate wealth at a faster pace than Gen X suggests that these generations are well-equipped to shape the future of American wealth distribution and economic trends. 

Sources: Newsweek, PlanAdvisor