Wealth of young Americans has grown at a historically high pace. Here's what you can learn from them
Young Americans have been credited with the downfall of several products and industries, such as diamond rings and cable television. Now, these consumers are beginning to dispel something else: the idea that they’re broke.
An analysis of Federal Reserve data from the Center for American Progress (CAP) found that households under 40 saw the greatest historic wealth increase from 2019 to 2023. These youngins saw an average increase of 49% in wealth ($174,000 to $259,000) during that time period, after adjusting for inflation.
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By comparison, 40-to-54-year-old households saw a 7% decrease in their wealth, while 55-to-69-year-old households saw a 4% increase and households 70 and above saw a 15% increase.
“No other age group has seen anywhere near this level of wealth accumulation during and after the pandemic,” the CAP wrote in its report.
In spite of this unprecedented growth, younger Americans still have a long way to go before owning a larger slice of the overall pie. The average wealth for households of all ages was $1.1 million, according to the analysis.
But after all the insults this generation has received about wasting money on things like coffee, it’s a positive sign they’ve come out of the pandemic with more wealth. Here’s what we can learn from their financial habits.
Holding onto stocks
The recent years of low unemployment and strong wages have allowed millennials to put their increased salaries and pandemic savings to work.
A big part of the gains that the average under-40 household saw during this time was from stocks and mutual funds. The CAP says that these financial assets made up around $31,000 of the $85,000 average wealth increase in this age category.
This doesn’t necessarily mean that millennials are brilliant investors, but that they stayed in the stock market — and reaped the rewards of its highs in the past few years.
Their strategy isn’t new, but one that Warren Buffett often advises: hold your stocks. It’s easy to get caught up in fear and frenzy, but a long-term mindset can be key in investing.
Read more: Jeff Bezos and Oprah Winfrey invest in this asset to keep their wealth safe — you may want to do the same in 2024
Paying down debt and buying homes
Young Americans are often characterized as being plagued by student loans and credit card debt. But it turns out that they’ve been slowly paying it off.
The CAP says that non-mortgage debt for under-40 households decreased by an average of $5,000. This is despite millennials carrying 30.26% and Gen Z 5.98% of all student loan debt in the U.S., according to the Education Data Initiative.
In addition, the CAP, citing Census Bureau data, says there was a nearly 2% increase (38.6% from 36.7%) in home ownership for under-35s from 2019 to 2023. A 2021 National Association of Realtors (NAR) survey found that 60% of millennials felt that student debt was delaying their ability to purchase a home.
Paying down some of this debt may have helped some younger Americans enter the housing market. During the CAP analysis period, the average housing wealth — home value minus mortgage debt — for those under 40 increased by $22,000.
These homeowners may be some of the lucky ones. The NAR’s 2023 Profile of Home Buyers and Sellers notes that the average age for a first-time homebuyer was 35, so it’s still tough for young people to invest in the housing market.
But you can learn plenty of lessons from young Americans. Having discipline when it comes to debt or the stock market can accelerate the growth of your wealth and free you up to either save money for something like a down payment or use it to make more money.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
