Gen X, Gen Y falling behind parents' wealth
For young people today, the American dream of working hard, saving money and becoming richer than their parents may be out of reach, according to a recent study.
Americans in their mid-30s and younger have accumulated less wealth than their parents did at that age more than 25 years ago — a trend that threatens to weaken the economy, according to the study by the Urban Institute, which investigates and analyzes the country's social and economic problems.
Stagnant wages, diminishing job opportunities and lost home values are behind the issue and have kept Americans from saving even as the economy doubled from the early 1980s, the study found.
“Young people are falling behind,” said Caroline Ratcliffe, one of the authors of the “Lost Generations? Wealth Building Among Young Americans” report.
“Across different generations and ages, what we tend to see in this country is that each generation is better off and wealthier. The fact that this group is falling behind is very different,” said Ratcliffe, a senior fellow at the Urban Institute.
If young Americans cannot accumulate wealth over their lifetimes, such as people in prior generations, they will be less able to support themselves when they retire, Ratcliffe said. And her study points out that despite the relative youth of those in Gen X and Gen Y — people born since 1966 — they may not be able to make up the ground they have lost.
University of Dayton alumnus Rebecca Young said she has benefited from her parents' strong savings, and she hopes to one day do the same for her children.
At 23, she is working toward a master's degree and stocking what she can in a rainy day fund she has had since high school. But, she said, it can be difficult to save, especially for those young people who take out large student loans during college.
“People in my generation are of the opinion that it's okay to take out tens of thousands of dollars in student loans,” said Young, who graduated in May. “That puts them in debt right away.”
And with that money in their checking accounts, they do not take into account that they are spending borrowed money, Young added.
Student loan debt has increased in recent years and recently passed $1 trillion (more than credit card debt). Ratcliffe said those large loan burdens can have a ripple effect, delaying young people from being able to build a savings or buy a house.