Millennials have come a long way since their days of being called lazy or entitled. Despite reaching key milestones later than their parents once did, they are now wealthier than previous generations were at their age.
“Younger families in the U.S. made remarkable gains,” according to an analysis of 2022 data by the St. Louis Federal Reserve.
Collectively, millennials are now worth about $15.95 trillion, up from $3.94 trillion five years earlier, according to Federal Reserve data.
Still, very few millennials would consider themselves wealthy. The disconnect between being rich on paper and feeling well off has been referred to as “phantom wealth.”
For example, gains in the value of a home or a retirement plan can feel like phantom wealth because they are illiquid and have no bearing on day-to-day cash flow.
Boosted by a strong jobs market and rising wages, many in this age group have purchased homes and benefited from soaring home values. To that point, the St. Louis Fed report found between 2019 and 2022, home prices jumped 44%.
Largely driven by real estate gains, the “median wealth of these younger people more than quadrupled” during this three-year period, the report said.
However, homeownership does not offer the same sort of safety cushion other investments do, noted Michael Liersch, head of advice and planning at Wells Fargo.
“Unless you are willing to downsize, you are really not going to monetize the increase in that asset,” said Liersch, especially in the case of a primary residence. “Millennials, in particular, haven’t been able to use that wealth.”
Millennials have ‘phantom wealth’
“Phantom wealth is a nonsensical term: assets either exist or they don’t,” said Brett House, an economics professor at Columbia Business School. However, there is a very real phenomenon at work.
As it turns out, “millennials experienced a sharp swing in their relative standing,” the St. Louis Fed report found.
The median wealth of older millennials, between the ages of 36 and 45, was 37% above expectations. The wealth of younger millennials and older Gen Zers, or those aged 26 to 35, exceeded expectations by 39%.
Compared with other generations, millennials are also more likely to say that their income went up over the last few months and that they expect their earnings potential to increase again in the year ahead, according to another report by TransUnion.
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But even as households became wealthier, inflation and instability have left more people in the bucket of so-called HENRYs — “high earners, not rich yet,” House said.
And “the ‘HENRY’ phenomenon isn’t limited to millennials or Gen Z,” he added.
“It’s harder for every generation to feel financially comfortable when the management of so much risk related to employment, healthcare, retirement pensions, insurance, and other components of economic well-being has been shifted to individuals during a period of rapidly rising prices,” House said.
‘There is so much more to achieve’
Many millennials also say it’s harder today to make it on their own than it was for their parents when they were starting out.
They have higher student loan balances, bigger mortgages and car payments, and more expensive child care costs, explained Sophia Bera Daigle, founder and CEO of Gen Y Planning, a financial planning firm for millennials.
“Cash flow has been tight,” she said.
That makes it more difficult to set extra money aside or make long-term plans, said Bera Daigle, a certified financial planner and a member of CNBC’s Advisor Council. “While they are making significant progress on reaching some financial goals, it still feels like there is so much more to achieve.”
However, feeling financially secure is often less about how much money you have and more about the ability to spend less than you make, experts say.
In part, higher prices have fostered the feeling of being overextended, according to CFP Kamila Elliott, co-founder and CEO of Collective Wealth Partners.
Elliott, who is also on CNBC’s FA Council, said clients often ask “Where is my money going?”
“If you feel like a lot of fixed expenses are going up, it may mean you need to cut back on the fun things,” she advised, such as eating out or taking a vacation.
“It’s going to take a little bit of an offset to have more money at the end of the month,” Elliott said.