Young People Have a Lot More Wealth Than We Thought

I’ve written numerous times about generational wealth on this blog. My biggest post was one comparing different generations using the Fed’s Distributional Financial Accounts back in September 2021. I’ve posted several updates to that post as new the quarterly data was released, but this post contains a major update. I’ll explain in great detail below about the updates, but first let me present the latest version of the chart (through 2023q3):

Regular readers will notice a few differences compared with past charts. The big one is that young people have a lot more wealth than it appeared in past versions of this chart! You’ll also notice that I have relabeled this line “Millennials & Gen Z (18+)” and shifted that line over to the left a few years to account for the fact that this isn’t just the wealth of Millennials, and therefore the median age of this group is lower than in my past charts. The two dollar figures I highlighted are at the median age of 30 for these age cohorts (unfortunately we don’t have data for Boomers at that age).

Updated Survey of Consumer Finances

The data I have always used in this chart comes from the Fed’s DFA which is updated quarterly. But that data is based on another Fed survey called the Survey of Consumer Finances, which is a large survey done every 3 years. The DFA data just projects the SCF data forward based on some assumptions. It turns out that when the 2022 survey data was released (read my summary of the data), young people had a lot more wealth than we thought based on just projecting the 2019 data forward.

Here’s one way to show the change. When we look at the wealth data for 2023q2 prior to the inclusion of the 2022 SCF, Millennials looked like they had about $8.3 trillion. But with the 2022 update, they now have over $13 trillion. There’s also a small overall decrease in wealth (again, looking at the same quarter but before and after the update), mostly correcting Gen X but a little for Boomers too.

If I had merely updated my charts using this new data, Millennials would be looking very good indeed in 2023q3: average wealth at the median age of 35 would be $183,000, compared with just $134,000 for Gen X and $107,000 for Boomers (yes, all adjusted for inflation, in this case with the PCEPI). But that big jump got me thinking about how the Fed DFA defines “Millennials”…

Including Gen Z

The Fed DFA defines Millennials as anyone “born 1981 or later.” For most years of this survey, that’s perfectly fine, as Gen Z were still children. But in 2023, the oldest members of Gen Z are 26. They are becoming adults and acquiring wealth. In 2022, 30 percent of 25 year-olds owned a home! This means that in the Fed DFA data, they are actually mixing in some of Gen Z’s wealth with Millennials. And when I just used the total Millennial population as the denominator, I would get the $183,000 wealth figure mentioned above, approaching double what Boomers had at the same age!

So how to fix this? The Fed’s SCF does have microdata, but that’s a lot of work and anyway it would quickly be out of date since wealth in 2023 is already much larger than 2022 thanks to the stock market increases recently.

Here’s how I settled on a fix, which is reflected in the first chart of this post: I used a new denominator that included all Millennials plus the population of Gen Z that is 18 or older. This will still bias the numbers down somewhat, since it is no longer an apples-to-apples comparison with earlier generations (I’m now using a large group that ranges from 18 to 42 years old in 2023, 18 to 41 in 2022, etc.). But I think it’s a reasonable way of working with the data that we have, until the Fed DFA updates with a separate number for Gen Z and Millennials.

This also means that I need to shift the Millennial/Gen Z line to the left to account for the lower median age of this group, which is now 30 in 2023 rather than 35. Doing so makes them look substantially wealthier than Gen X at the same age: well more than double! It also doesn’t make much of a difference here if I used the CPI instead of PCE (Gen X would have $52,000 instead of the $56,000 in my chart).

No comparison is perfect, but I think these are the best we can do with the current data.

To make sure I’m not completely out to lunch with my comparisons, we can use the Fed SCF data for 2022 to look at the wealth of young people. They don’t have it by generation in the publicly available data, but we can look at age cohorts which roughly approximate the generations. Ages 35-44 is mostly older Millennials, which “Under 35” will be a combination of Millennials and Gen Z. The average net worth of both these groups is the highest it has ever been (the median is too, but average is comparable with my chart). For reference, the 35-44 age group is mostly Boomers in 1989 and mostly Gen X in 2007.

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