WSJ Your Money Briefing - Millennials Are Now Wealthier Than Generations Before at the Same Age

Episode Date: August 16, 2024

They were the generation financially falling behind. But now, millennials have become wealthier than previous generations were at their age. WSJ personal finance reporter Joe Pinsker tells host Ariana Aspuru how the shocking turnaround is influencing their decisions about money.  Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Here's your money briefing for Friday, August 16th. I'm Arianna Espudu for The Wall Street Journal, filling in for J.R. Whelan. Millennials were once seen as a generation always playing catch-up, behind on building wealth, getting married, and having kids. But now millennials are wealthier than previous generations were at their age. And the turnaround has been so dramatic that they can't believe it either. There's this feeling maybe that it could disappear. And that's a really potent and scary feeling for people who during their formative years witnessed the Great Recession. And so even if many people in this generation have been very successful,

there still is that sensation of looking over their shoulder and sort of waiting to see the next thing that happens. Wall Street Journal personal finance reporter Joe Pinsker joins me after the break. options for your business. Because at TD Insurance, we understand that your business is unique, so your business insurance should be too. Whether you're a shop owner, a pet groomer, a contractor or a consultant, you can get customized coverage for your business. Contact a licensed TD Insurance advisor to learn more. Millennials are now wealthier than previous generations were at their age. WSJ personal finance reporter Joe Pinsker joins me to talk about it. So Joe, are millennials popping champagne here? Just how much of a turnaround is this?

It's a pretty big one for a long stretch of their adulthoods. Millennials have been behind where we would expect a generation to be at their age financially. But lately that has turned around. The median household net worth of older millennials was about $60,000 in 2019. And three years later in 2022, it had more than doubled to $130,000, according to the St. Louis Fed. And the turnaround for the generation has been so big that if you look at millennials, along with some older members of Gen Z, that group of adults was 25% wealthier at the beginning of this year, then Gen Xers and Baby Booners were in the past when they were a similar age.

Are they popping champagne is maybe a different question that we can kind of get to. This is a generation with a lot of economic scars and memories of tough times. So that's a bit more mixed. And why were millennials in such a bad financial situation before? Yeah, it really is a mix of things. For many older millennials, it was about having a pretty rocky start and finishing their schooling in the Great Recession or the wake of the Great Recession.

For many younger ones, it was sort of being unable to afford a home and feeling like they couldn't get ahead. But whatever part of the generation you look at, their experience really shows just how important the macroeconomic conditions are when you're just setting out financially as an adult. We're talking about overall wealth here. So it's not just money in a bank account

or money in their savings account. What are some of the ways that millennials have built it? Housing really is the biggest one and that has been driving this effect. If you look over the past four years, millennials housing wealth grew by $2.5 trillion even after accounting for the additional mortgage debt that they took on during that time. Obviously, it's not news that home prices have soared in the past few years. But basically, if you were a millennial who managed to buy a home,

you benefited greatly from that, whether you were somebody who managed to scrape together a down payment in the early 2010s, or if you just sort of snuck in to the market more recently before prices went up. Another big factor is just retirement accounts. This is a generation that has sort of been auto enrolled into retirement contributions through their employer in a way that previous generations weren't.

And so just that steady investment over time means that the run-up in stock prices in the past few years has also really benefited a lot of millennials. As we look at home prices and stocks, this also underlines how wealth for all generations has increased in the past several years. But for millennials, it really has made the biggest percentage difference and really shaped their trajectory because they're just earlier on in their wealth building process. And as with other generations, there are different levels of wealth. What are some of the disparities that millennials are experiencing? An extremely important point that came up in interviews I did with economists is that we really like to think about the differences between generations and maybe stereotype them and talk about the

differences between them. But in fact, inequality within generations is sort of a more urgent and important distinction than inequality between generations. So if you look at the millennials, inequality has widened over the past several decades and that's been true within the generation as well. So there are many Millennials who are thriving, but there are plenty who we were in touch with for this story who said that they were just struggling to get ahead. We spoke with one couple in Salt Lake City. They're in their early 40s and they think they may not be able to buy a house until they're 50.

So there's really a wide range of experiences and it's important not to talk about generations monolithically because there's such a diversity of experiences within them. For this story, you and your colleague Veronica Dagger spoke to a handful of millennials who now feel hopeful about their financial future. How are they looking to continue building their wealth? The couple that comes to mind here in all the interviews I did is Christian Hutchinson and Becky Wang, who live in the Detroit area.

And they are a really good illustration of the sort of psychology and frame of mind that you see a lot of in this generation. By all accounts, this couple is doing really well. They both have stable jobs. Their mortgage is under 4%. They are thriving and they own rental properties as well. And at the same time, they are always looking to build on their wealth. They're looking around now for other ways to invest. They're maybe thinking of buying

a laundromat. Both of them also want to hold side gigs. They're very successful, but at the same time, uneasy about everything just falling apart. And it speaks to a concept that we heard in our reporting from a financial planner named Taylor Leary, who was talking about the concept of phantom wealth, which is that when this generation has lots of gains in areas like a house or a 401k, it feels good on some level, but also it's illiquid and it doesn't really have bearing on your day-to-day cash flow and there's this feeling maybe

that it could disappear and that's a really potent and scary feeling for people who during their formative years witnessed the Great Recession. And so even if many people in this generation have been very successful, there still is that sensation of looking over their shoulder and sort of waiting to see the next thing that happens. That's WSJ reporter Joe Pinsker. And that's it for your money briefing. We'll be back on Sunday for the first episode in our new three-part series, Gen Z and the

Debt Trap. In part one, we'll dive into why Gen Z is accumulating debt faster than any other generation. This episode was produced by me, Arianna Aspuru. Jessica Fenton and Michael Laval wrote our theme music. Our supervising producer is Melanie Roy. Aisha Al-Muslim is our development producer. Scott Salloway and Chris Zinsley are our deputy editors. And Falana Patterson is The Wall Street Journal's head of news audio. Thanks for

listening.