A Financial Scorecard: Millennials vs. Baby Boomers
For many years, it’s been conventional wisdom that children will enjoy a better standard of living than their parents.
This axiom, however, is no longer a given.
On many different fronts, Millennials are faring worse financially than their parents. A report conducted by Young Invincibles and funded by the Ford Foundation illustrates a variety of ways in which Millennials have not kept up with their parents.
Here are some key measures illustrating that the 75 million Millennials, which make up the greatest share of the workforce, have fallen behind:
Workers between the ages of 25 and 34 earn lower average salaries ($40,581) than Baby Boomers did at the same age ($50,910). These figures represent a stunning salary decline of 20%.
Salaries earned at the beginning of a career are critical because they often set the stage for an individual’s lifetime earnings.
In 1989, a young adult without a college degree earned roughly the same income as a college graduate with student debt does today.
Unlike their parents, young adults today face ever-rising college costs and historic student debt. While Millennials who’ve earned college degrees make more than those who don’t have a degree, they have not done as well as Baby Boomers at the same age.
The net wealth of Millennials is only half that of Baby Boomers at that age. The report characterizes net wealth as what remains when you subtract your debts from your assets.
Young adults with college debt have seen their net wealth plummet in just two generations. In 1989 Baby Boomers with college debt had a net wealth of $86,500. A quarter century later, Millennials’ net wealth has plunged to $6,600.
When Baby Boomers were young adults, they owned double the assets that young adults do now. Having a college education hasn’t protected Millennials from these declines. Average assets for Millennials with a college degree, as well as college debt, have declined 71% and for graduates without debt, average assets have dropped 45%.
Why the Financial Decline
The report suggests why Millennials have been lagging behind their parents’ generation.
“These findings uncover that Millennials have been set back significantly, by not just the Great Recession but by decades-long financial trends, resulting in major generational declines in financial security between Millennials and Baby Boomers when they were the same age,” said Tom Allison, Deputy Director of Policy and Research for Young Invincibles.
“Millennials make up the greatest share of the workforce and the largest generation in history, so in many ways the situation facing young adults today forecasts the financial challenges ahead for the nation.”
Even though Millennials may be facing more financial headwinds than previous generations, they certainly have plenty of time and resources to play catch-up. By developing smart investment and savings habits early on, millennials can change the course and prosper just as their parents’ generation did.