Millennials supposedly doing well in a dysfunctional economy

Millennials are wealthier than ever, according to a new report, which may come as a shock to the general population. Critics have long chided millennials – those born from 1981 to 1996 – for being slow to act on major life decisions – whether it is getting a job, moving out of their parents’ basement, getting married or buying a home. Considering that they lived through the Great Recession, their conservative financial choices should be appreciated, not condemned.

Despite these constant critiques, they’re supposedly doing surprisingly well financially. “The median household net worth of older millennials, born in the 1980s, rose to $130,000 in 2022 from $60,000 in 2019, according to inflation-adjusted data from the Federal Reserve Bank of St. Louis,” the Wall Street Journal reported, “Median wealth more than quadrupled to $41,000 for Americans born in the 1990s, which includes the generation’s youngest members, born in 1996.”

What’s more, millennials boast more wealth than prior generations had at the same age, even after factoring in inflation. This sounds like something to celebrate, but something seems amiss. I’d venture to say that most millennials don’t necessarily feel like they are doing much better than their predecessors, and perhaps for good reason.

Thanks to inflation, overall prices are up by more than 20 percent since the beginning of 2020, which greatly erodes any salary increases or stock market gains millennials have enjoyed. Anyone who has gone grocery shopping knows this inflationary pain. Americans are spending around 11 percent of their income on food.

If that weren’t concerning enough, the housing market is also an unmitigated mess for prospective first-time buyers. Housing prices are up in Georgia by about 69 percent from 2020, and car loan and mortgage rates have likewise skyrocketed. Mortgage rates are hovering around 7 percent, compared to less than 3 percent in 2020.

Despite these worrying stats, the Wall Street Journal outlined millennials’ considerable wealth, but much of it is derived from retirement funds that they cannot access yet, at least in whole, as well as housing appreciation. Yet that doesn’t necessarily result in liquidity either. It is a long-term investment.

While housing appreciation looks great on paper, it matters less when the entire housing market’s prices are vastly inflated. Besides, most millennials are not in the market to downsize their homes, and if they buy another, then they will deal with obscene prices. What’s more, given the high mortgage rates, they are locked into their home and unable to sell without taking a financial hit.

All things considered, millennials — just like younger generations — face many hurdles. Not everyone owns a home, others need new cars and building a family is an expensive prospect. “It’s unclear if millennials are better off overall, given the outsize increases in some of the most burdensome costs, such as child care, housing and health care,” the Wall Street Journal admitted. “They’re also projected to live longer than Boomers, so they’ll need to make their money last.”

Are millennials better off than some of their forebears? I am not so sure. The average home price in 1975 was around $39,300 and the average new vehicle price was less than $5,000. Meanwhile the median household income in 1975 was $13,720, which represents about 35 percent of the average home cost and 275 percent of the average car price. Inflation has certainly taken a toll since then. The median millennial household income in 2022 was just shy of $90,000, which is about 26 percent of that year’s home price and 191 percent of the average new car price — far less than their predecessors in 1975.

Complicating factors even further is the fact that less than 50 percent of married couples depended on two incomes in 1975. They were able to get by with a single earner, but the number of dual income families has since surged. Of course, spouses of all sexes ought to pursue their professional aspirations, but as time has progressed, more couples now need dual incomes simply to make ends meet. That also creates an additional expense for many: child care, since both spouses are at work during the day. The average cost of child care ranges from $7,300 to 8,500 a year for a single child. 

Put simply, some earlier generations appear to have had it easier financially than millennials. Sure, millennials might appear to have more assets and wealth on paper. How much does that matter when many of those dollars are worth less thanks to inflation and cannot be spent because they are locked into retirement funds and homes?