Millennials Are Financially OK. But They Might Not Feel It

Changing Tunes

It was once fashionable to blame expensive lattes and avocado toast for millennials’ inability to make a down payment on a house. For years, the largest living generation has taken heat for its perceived lack of money management skills. But economists are changing their tune; it turns out that millennials may be on more solid financial footing after all.

What Is Phantom Wealth?

Young Americans still face plenty of economic challenges. The millennial generation — which includes people born between 1981 and 1996 — which has worked through both the Great Recession and the pandemic, still faces a host of financial challenges including high debt, a tough housing market, and persistent childcare affordability issues.

While millennials may still struggle financially day-to-day, however, many of them have rosier long-term prospects thanks to “phantom wealth.” That’s how a Wall Street Journal report describes their considerable wealth that’s stored away in illiquid assets like houses and retirement accounts.

The stock market and the median U.S. home price have surged to record highs in recent months. Those gains might not make it any easier for millennials to pay for daycare or buy a latte – but they are making a real difference in this generations’ net worth. In fact, since the pandemic, millennials’ wealth gains have significantly outpaced those of other generations.

Exceptions to the Rule

At the beginning of this year, millennials still held less than 15% of the total wealth in the U.S., per St. Louis Fed data cited by the WSJ. That doesn’t sound like a lot, but it’s roughly 25% more than Gen Xers and baby boomers held at a comparable age. And with much of that wealth stored in assets that typically appreciate in value, like 401(k)s and real estate, there’s a high potential for future growth.

Of course, not all millennials have phantom wealth – especially younger millennials who may not have purchased a house before prices surged or who delayed saving for retirement. As a result, the wealth gap among millennials is larger than it was for boomers at a similar age, per the report.

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