Millennials aren't as wealthy as Boomers or Gen-Xers were at the same stage of their lives

WAKIL KOHSAR / AFP / Getty Images

Millennials aren’t doing as well as generations before them when it comes to wealth accumulation.

They have about only 60% of the total wealth of baby boomers and Gen-Xers had at the same stage in their lives.

This chart from the IMF shows comparable wealth accumulation by age for each generation. It uses median net worth, adjusting the wealth levels to 2013 dollars. It’s for US citizens, but provides a useful guide as to what’s likely to have been seen in other developed nations.

Source: IMF

Compared to boomers and Xers who had accumulated around the same level of wealth by the same age, millennials are clearly lagging behind.

According to Lisa Dettling and Joanne Hsu, senior economists at the US Federal Reserve who authored the report, one major factor that helps to explain the generational gap has been divergent economic conditions as each entered early adulthood.

“Successive cohorts born between 1946 and 1990 generally experienced slower economic growth during young adulthood than those that came before them,” they say.

“These macroeconomic conditions were the result of world developments that differed across generations: the post–World War II recovery, the end of the Cold War, the rise of computing and the Internet, and the Great Recession, among many others. “

Dettling and Hsu say that young adult baby boomers faced considerably more robust economic growth than both Generation X and millennial young adults, something that leads them to conclude that millennials, at least so far, experienced the worst economic circumstances of all groups as they entered adulthood.

This chart shows the average GDP growth rates for each generation when they were aged between 18 to 31 years.

Source: IMF

While economic conditions played significant role the gap in accumulated wealth, Dettling and Hsu believe that higher education costs have also been contributing factor.

“Millennials entered their working lives with much larger debt than young adults of previous generations. These debt burdens may continue to influence their choices and economic circumstances for years to come,” they say.

And that includes home ownership rates, with that among millennials around 10% lower than those of their baby boomer and Gen-X counterparts at the same age.

That likely reflects a combination of weaker labour market conditions, a preference among millennials to further their studies and interest rates far lower than what they were in the past, contributing to asset price inflation as more debt was taken on to invest.

That clearly benefited those who already held assets which, in most cases, were older generations.

You can read the full research piece here.

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