Millennials Are Building Wealth Faster Than Previous Generations – Here’s How They’re Doing It

Millennials Outpace Older Generations in Wealth Growth

Data from Wealthfront, a popular investing platform, reveals that millennials have grown their wealth by an impressive 137% over the past five years. In comparison, Gen X investors saw a 76% increase, while baby boomers grew their wealth by just 40%.

• In January 2020, the average millennial on Wealthfront had $45,600 saved and invested. By 2024, that number skyrocketed to $108,130.
• The number of millennial millionaires on the platform also surged by 144%, compared to a 31% increase among Gen X millionaires.

Why Are Millennials Thriving Financially?

According to David Fortunato, CEO of Wealthfront, millennials’ financial success can be attributed to their investment strategies and disciplined saving habits.

1. Aggressive Investing in Equities

Millennials are investing more in stocks compared to previous generations at the same age. This approach, while riskier, has led to higher returns over time.

2. Focus on Passive Investing

Instead of trying to “beat the market,” millennials are embracing passive investing strategies like index funds and ETFs, which offer steady, long-term growth.

3. Higher Savings Rates

Millennials are saving more aggressively than Gen X or baby boomers. This habit, combined with compound interest, has significantly boosted their wealth.

Real Estate and Net Worth Growth

Millennials are also catching up in real estate, a key component of wealth building.

• The value of real estate held by millennials grew by $2.5 trillion from 2020 to 2024.
• Home values for millennials increased by over 40% in the past five years, outpacing Gen X (33%) and baby boomers (29%).

Despite these gains, older generations still hold more total net worth and real estate. However, millennials are closing the gap at an impressive rate.

Challenges Millennials Overcame

Millennials have faced significant financial hurdles, including:

• Entering the job market during the 2007-09 recession.
• Dealing with student loan debt, wage stagnation, and a competitive housing market.
• Navigating the economic impacts of the COVID-19 pandemic and high inflation.

Despite these challenges, millennials have emerged more resilient and financially savvy.

Key Takeaways for Financial Success

Here are some lessons we can learn from millennials’ wealth-building strategies:

1. Invest Early and Consistently: Start investing as soon as possible, even with small amounts.
2. Embrace Passive Investing: Focus on long-term growth rather than short-term gains.
3. Save Aggressively: Prioritize saving and take advantage of compound interest.
4. Stay Resilient: Learn from economic challenges and adapt your financial strategies.

How This Impacts the Auto and Vehicle Industry

As millennials grow wealthier, their spending habits are likely to influence the auto and vehicle market. For instance:

• Increased demand for electric vehicles (EVs) as millennials prioritize sustainability.
• Growth in the luxury car market as more millennials enter higher income brackets.
• Higher interest in car-sharing and subscription services as millennials seek flexible ownership models.

FAQs

1. What age group does the term “millennials” refer to?

Millennials are individuals born between 1981 and 1996.

2. How much has millennial wealth grown since 2020?

Millennial wealth has grown by 137% since 2020, according to Wealthfront data.

3. What is passive investing?

Passive investing involves strategies like index funds and ETFs, which aim to match market returns rather than outperform them.

4. How has the COVID-19 pandemic affected millennials financially?

Despite challenges like job losses and inflation, millennials have shown resilience by increasing savings and focusing on long-term investments.

5. What role does real estate play in millennial wealth growth?

Real estate holdings among millennials have grown by $2.5 trillion since 2020, contributing significantly to their net worth.