How did millennial wealth grow by $5 trillion in just two years? Millennials now make up more than one-third of the U.S. workforce and are the most educated generation yet; over 35% have college degrees, which is more than Baby Boomers at the same age. Millennial wealth management is different than it was for previous generations. While boomers could afford college on a minimum wage job, millennials had to take on decades of debt to graduate. It wasn’t until student loan payments were paused that millennials were able to get their wealth going. Here’s how they worked it out.
The Inflation Reduction Act of 2022
But now, with the Inflation Reduction Act, 87,000 new IRS agents will be on the federal payroll. These new hires will be tasked with helping the Federal Government collect more taxes, and many are afraid that middle-class families will be targeted.
The rise of millennial homeowners
According to Axios, millennial wealth grew by a whopping $5 trillion over two years. The study found that with student loan payments on pause during the pandemic and stimulus checks providing support, millennials were finally able to buy into the housing market. That led to an increase in wealth as housing prices continued to rise.
As we enter a new decade, it will be interesting to see how this trend continues. One interesting way millennials have worked around their lower net worths is by co-buying homes. It’s a solid financial move considering younger generations are used to sharing a living space.
Student loan debt looms over new wealth
According to a recent report by the Federal Reserve, the total amount of student loan debt in America has reached an all-time high of $1.56 trillion. This is a cause for concern, as many experts believe this debt could come back to haunt us in the form of higher interest rates and inflation.
Another threat to growing wealth is credit card debt. As incomes continue to stagnate, more and more millennials are relying on credit cards and other forms of debt. The average U.S. credit card balance is now slightly over $6000. Credit debt can become a vicious cycle if you don’t pay it all off. With interest rates rising, payments on credit lines will probably continue to grow and eat away at other account balances.
Don’t put all your eggs in one house
The old saying goes, don’t put all your eggs in one basket. That is especially true when it comes to housing. The pandemic has shown us that things can change quickly and unexpectedly. By diversifying your investments, you can protect yourself from financial woes if the housing market turns for the worse.
While investment markets outside of housing are down, millennials seem more willing to invest in crypto than previous generations. Time will tell if the move pays off, but it’s a good sign of financial literacy that millennial wealth management includes diversifying.