Last week I received a thoughtful email from a reader in response to some of the data I shared about how, despite our sour feelings toward inflation, incomes have actually been keeping pace.
I love the feedback and genuinely appreciate people taking the time to read the article and send over their thoughts. He had some valid points. And he also sparked the inspiration for this week’s post after ending the email with the following proclamation:
“This younger generation is absolutely screwed.”
Now, I realize I’m treading on thin ice here by continuing to write articles about how individuals and the economy are doing better than people think. And I’m fully aware that I may be one more chart away from losing all of my readers.
However, if you’ll hear me out, I don’t think young people are all that screwed.
Before we get into some numbers, let’s start with a quote I saw on X recently:
“It requires a little fortune, now, to buy a house, and every article of furniture costs about three times as much as it did ten years ago.”
Right?? It’s just too expensive to live these days.
Oh, wait, sorry, that’s not from a post on X. The quote is actually pulled directly from a newspaper in 1866.
How little seems to have changed in 160 years.
The Boston Consulting Group’s Center for Macroeconomics published a fantastic report tackling this exact question: are the kids screwed?
Let’s dive into some of the findings.
As I shared last week, incomes have risen for each generation. After adjusting for inflation, the oldest members of Gen Z (age 28) are earning a median income of about $42,000. That’s roughly 25% more than Millennials were earning at the same age, and 50% more than Baby Boomers:
This is not 50% more in raw dollars, but 50% more after adjusting for inflation.
And no, this is not a few rich kids skewing the numbers; the graph plots median wages, not average.
The story is the same when it comes to wealth. Millennial net worth did lag behind directly following the 2008 financial crisis, but by age 34, Millennial households had a net worth of about $331,000. At that same age, Gen X was at $251,000, and Boomers were at $229,000:
These numbers are averages, because median net worth at young ages tends to be zero or negative, so these figures are brought up by the wealthy. But using the averages, there’s no evidence that wealth inequality is greater than prior generations.
“Ok but what about homes?”
It’s true, young people own fewer houses than they used to. In 1975, it took about 3 1/2 years of median income to afford a median new home. Today, it takes nearly 6. The median age of first-time homebuyers has jumped from 30 to 40 since 2008.
There are some reasons for the explosion in home prices. The average new home today is nearly 50% bigger than it was in the 1970s. Controlling for size alone, homes are only about 7% more expensive compared to incomes.
That said, it’s harder to find small, starter homes these days. Not to mention 90% of Millennials and Gen Zers live in cities or suburbs where new homes are in short supply.
But one benefit of the delay in homeownership is that Millennials’ stock holdings account for 19% of their assets at age 34, compared with just 11% for Gen X and 8% for Boomers at this age. Younger generations are getting more exposure to the stock market and building wealth faster.
So if young people are earning more money and building more wealth than their parents, why does everyone still feel so miserable?
I think there’s some old saying about happiness equals reality minus expectations.
Well, maybe our expectations are out of whack.
In a 2024 survey by Empower, each generation was asked how much money they’d need to earn each year to feel financially successful. Here are the results:
Yep. Gen Z needs $600,000 to feel successful.
The median salary in the U.S. is around $60,000. Less than 1% of Americans make $600,000 a year.
So the majority of Gen Z has set a definition of success that they’re almost mathematically guaranteed to miss.
And I don’t think it’s hard to make the assumption that at least some of this financial dysmorphia probably comes from our phones feeding us wall-to-wall private jets, luxury apartments, and 24-year-olds who supposedly made millions on crypto.
To finish up here, I want to point out that wealth is correlated with age. Americans aged 65-69 are worth roughly 30 times more than the wealthiest Americans aged 18-24.
And that’s ok. When have young people ever been rich? Isn’t the whole point of your 20s to try and figure out what you want to do with your life? Despite what social media may tell us, being poor when you’re young is very normal.
Going from a poor college student to a financially successful adult has always been a daunting and difficult process.
No one is guaranteed wealth. There will always be people who can afford a home and those who can’t. People who have high-paying jobs and those who don’t. Some young people will struggle. Some won’t reach the level of prosperity their parents did. That was true in every generation before this one, too.
But “the younger generation is screwed”? I’m not sure about that. The data just doesn’t support it.
They’ll find their way, just like every generation before.
Thanks for reading!
Jake Elm, CFP® is a financial advisor at Dentist Advisors. Jake a graduate of Utah Valley University’s nationally ranked Personal Financial Planning program. As a financial advisor at Dentist Advisors, he provides dentists with fiduciary guidance related to investments, debt, savings, taxes, and insurance. Learn more about Jake.