Millennials may not have it so bad after all. Indeed, the average wealth of households under 40 grew by 49% between 2019 and 2023, according to a new report from Center for American Progress (CAP). Now, younger generations’ average wealth is $259,000: an $85,000 increase during the past five years, the analysis of Federal Reserve data by the left-leaning think tank shows.
This rapid rate of wealth growth is unprecedented in the data series’ history. What’s more, the increase likely is “broad-based” among all income types, not just “a small group of wealthy young people driving these gains,” according to the CAP report.
For its analysis, CAP used the Fed’s Distributional Financial Accounts data, which has tracked quarterly estimates of the distribution of U.S. household wealth since the late 1980s. By CAP’s definition, household wealth is an accumulation of stocks, bank accounts, and real estate, minus liabilities including mortgages and student-loan debt.
These findings may be surprising, though, considering the laundry list of millennial woes, from staggering student loan debt to painful housing unaffordability to rising inflation rates. But millennials have also reaped the benefits of the great wealth transfer, or receiving vast amounts of inheritance money from their parents and grandparents—but they’ve also been smarter about making investments, experts say.
The great wealth transfer
According to CAP’s analysis, some of the major areas in which people under age 40 have gained wealth is through housing, liquid assets, personal businesses, stocks, major purchases (such as cars), and deflating credit card and student loan debt.
Housing accounts for the largest gain in assets for this age group. Indeed, housing wealth—which CAP defines as home value minus mortgage debt—rose $22,000 between 2019 and 2023, despite challenges for many members of younger generations in being able to break into the housing market. This has been largely driven by the millennials who were able to buy a home either before or during the pandemic when mortgage rates were lower and home prices were more affordable.
“Millennials that saved [and] invested as well as purchased homes soon after entering the workforce are most likely in okay to strong financial positions,” Mark Johnson, a professor and investments and portfolio management fellow at Wake Forest University School of Business, tells Fortune. “Additionally, extended periods of low interest rates and low inflation helped boost asset values—thus contributing to creating wealth—for the majority of millennials’ working years.”
While some millennials were able to break into the housing market with little to no help from their parents, many also benefited from the great wealth transfer, especially for real estate purchases.
In fact, many members of this generation are “certainly banking” on inheritance, Stuart Siegel, chief strategy officer and head of new developments at global real estate company Engel & Völkers, tells Fortune.
“Baby boomers are purposely sharing assets with their children over a longer trajectory, and unconnected to a death or health event,” Siegel says. Millennials are “looking to leverage it even more through earlier access. If a parent will help them with a real estate down payment when they identify an opportunity, they can be opportunistic and begin actively developing their own investment portfolio that much sooner.”
In other words, the sooner a millennial can purchase a home, the sooner they can start building a portfolio of meaningful wealth, which could include other properties or use that money gained from the real estate transaction itself to make other investments. While some millennials undoubtedly rely on inheritance money to set themselves up for financial success, other experts say members of this generation have also just simply gotten smarter with their money.
Gloria Garcia, a wealth manager with wealth management firm LourdMurray, says while there are some millennials who expect money or a home from their inheritance, there are also some who aren’t relying on that to be able to fund their retirement. Indeed, there is more “awareness about being proactive and saving for retirement” through a 401(k) or IRA.
“This shift from previous generations, who relied on pensions, Social Security, and inheritances, highlights the growing sense of self-reliance and proactive planning among millennials,” Garcia tells Fortune. To be sure, many millennials still face challenges in accessing affordable housing. “This aligns with wealth increasing in investment vehicles when millennials have been saving for a home but haven’t had the right opportunity yet.”
What experts do agree on, however, is that we can expect millennial wealth growth to continue well into the future.
“The baby boomer wealth transfer is in its early stages, and growth has been kick-started for those who have benefited so far,” Siegel says.
