Playing Catch-up

AuthorLisa Dettling and Joanne W. Hsu

Playing Catch-up Finance & Development, June 2017, Vol. 54, No. 2

Lisa Dettling and Joanne W. Hsu

Youth today are not building wealth the way their parents did

Millennials began to enter the workforce during the most severe global economic crisis since the Great Depression, and their present and future economic decisions will be shaped by the historic upheaval in housing, financial, and labor markets they faced at the onset of adulthood. Millennials must also contend with other emerging issues critical to their prospects of building wealth, such as the rapidly escalating cost of higher education and uncertain retirement income.

These developments have presented millennials with economic circumstances very different from those of preceding generations. We highlight three generations of young adults and the early years of their adulthood: baby boomers (born between 1946 and 1964), Generation X (born between 1965 and 1980), and millennials (born after 1980) (see Chart 1). Successive cohorts born between 1946 and 1990 generally experienced slower economic growth during young adulthood than those that came before them. 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. On average, young adult baby boomers faced considerably more robust economic growth than both Generation X and millennial young adults; millennials (thus far) have experienced the worst economic circumstances as they entered adulthood.

To see how these broad patterns of macroeconomic growth affected the financial situation of the typical household in these different cohorts, we turn to the 1983 to 2013 waves of the Survey of Consumer Finances, a nationally representative survey of household wealth in the United States conducted by the Federal Reserve Board.

To capture families’ general financial situations over their life cycle, we focus on median net worth—a general measure of a family’s net economic position, defined as the difference between its assets and liabilities. Though millennials are just starting to accumulate wealth, their current trajectory is well below that of both the baby boomer and Generation X cohorts at comparable ages (see Chart 2). Between ages 25 and 34, the typical millennial’s net worth was about 60 percent that of the typical baby boomer at the same age. And...

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