Millennials have been the generation that has been continuously portrayed negatively in the financial narrative for the majority of their adult lives. Too much debt from school. The property market is too costly. They were unlucky to enter the workforce during the 2008 financial crisis and then witness the pandemic disrupt the economy once more as they were starting to stabilize. The narrative was compassionate and, for the most part, true.
The data from the Federal Reserve now presents a different picture. Over the previous few years, the net worth of millennials has almost quadrupled, with the average household in their 30s making about $325,952. Because the gains have been concentrated at the top of the distribution, the median is significantly smaller, at about $91,181. However, even after taking that spread into consideration, the trend is rising fast in a way that wasn’t apparent even five years ago.
This was primarily driven by two factors. Real estate comes first. Millennials made up the majority of the nation’s homebuyers, and those who made purchases prior to or during the post-pandemic price spike—despite the suffering—accumulated equity more quickly than nearly all previous projections would have predicted. In most US markets, a home bought in 2018 or 2019 is now worth far more than it was then. This appreciation has directly contributed to net worth in a way that seems almost unbelievable to those who recall being told that homeownership was out of reach for their generation.
Compounding in retirement accounts is the second motivator. Millennials who began making early contributions to 401(k)s and IRAs, particularly those who did not panic and sell during the 2020 market crashes, have witnessed those accounts grow at rates that make compound interest math seem less like a concept from a textbook and more like something that is actually happening in an actual account. The folks who were already in the market and remained there were in the best position to profit from the post-pandemic equity bull market.
The interesting aspect of this tale is the difference between the median and the average. A median of $91,181 and an average of $325,952 for the same group indicates that a comparatively small number of individuals with significantly higher net worths—such as real estate investors, private company equity holders, and early employees of startups that went public—are driving the average up considerably. The majority of millennials in their 30s do not earn $325,000. However, a greater proportion of individuals are nearer the median, and the number is rising more quickly than it did for earlier generations at the same age.
Generally speaking, financial advisors advise reaching a net worth of three times your yearly income by the time you are forty years old. That’s $210,000 for someone making $70,000 year, which is more doable than it seems if you began investing in your mid-20s and continued to do so consistently. When employer 401(k) matching is maximized and Roth IRA contributions are added, the 20% savings rate benchmark allows the math to function as compound interest should.
Contrary to popular belief, the evidence indicates that the generation that experienced the greatest economic shocks in their early adult years may be in better financial health at age 35 or 38 than the headlines of their childhood ever suggested. With housing prices, childcare bills, and the potential inheritance issues that come with aging parents, it’s less clear if that will continue once they enter their 40s. For now, however, the story is more depressing than the numbers.