Feeling left behind by the economy, younger Americans are charting a different course for building wealth — sometimes at their own risk

It was a sacred family ritual for Samantha Wade. Every Sunday, her parents treated her and her two siblings to lunch and an activity. Rainy days were prime for the flea market, movie theater or mall. Good weather meant trips to the zoo or park. Only during their annual vacations to Myrtle Beach from their Kentucky home did her family miss the outing — in which case, the fun lasted all week.

Now 28 and with four children of her own, Wade considers those childhood memories more than just artifacts of a past life. They’re relics of a bygone economy.

Eight months ago, Wade gave birth to her daughter, eventually deciding to quit her job at a local bank when the added child care costs threatened to eat up her paycheck. Her husband still works, often 60 hours a week on unpredictable shifts as a truck driver. His pay is higher than the income her parents made at any point in their careers, she says, her mother a waitress and her dad a delivery driver and then security guard. The Wade family, however, struggles to put it toward anything else but bills.

“I’m sure it wasn’t easy to come up with that money, but they were still able to save it up and go on vacation or to afford housing,” Wade says, referring to her parents. “Things were more affordable then than they are now. It’s impossible to be able to get ahead, impossible for two parents to want to work in a household. I feel like I just can’t get to where I want to go in life.”

Nearly 2 in 5 (38 percent) Generation Zers and millennials (or those between the ages of 18 and 43) believe they have a harder time building financial wealth than their parents did at their age due to the economy, a new Bankrate survey found. Less than half as many (17 percent) feel that they have it easier.

Every generation is more likely to think that they’ve had it worse. When it comes to Gen Xers and baby boomers, just 11 percent of those between the ages of 44 and 78 feel they’ve had an easier time growing wealth than their parents did because of the economy. About a quarter (24 percent) of Gen X and baby boomers think they had it harder.

Younger Americans have long indicated that the economy feels tough for them. They’re struggling to afford homes, saddled with student loan debt and drowning in child-care costs when they start their families. In the post-pandemic era, they’ve been reeling from the double blows of elevated inflation and expensive financing costs.

But those challenges are leading them to diverge from their parents’ financial footsteps, Bankrate’s newest poll also finds. Almost 3 in 10 (28 percent) Gen Z and millennials say they’re either considering or have already pursued different means of growing their wealth from what their parents did at their age, thanks to the economic environment.

‘I only know so many ways to grow our wealth’

Sometimes the new courses young people chart for themselves are far from unconventional. For Wade, the main way she’s pushed her finances further than her parents did is by becoming a homeowner.

Wade says her parents rarely talked to her about money, but the one lesson they did impart is that buying a house is a more financially savvy investment than renting.

People have always said, ‘If you’re going to put your money into something, it might as well be a house. If you’re renting, you’re throwing that money away. So that was one thing I did.

— Samantha WadeKentucky resident

The couple bought their three-bedroom home four years ago for $129,000 and financed it with a 3.5 percent mortgage rate. It’s since climbed to $180,000 in value. They’d rather wait out the tough market than cash in — even if it’s more than a century old and cramped for their family of six.

But owning a home hasn’t insulated her from financial distress. A broken water heater in November forced the family to deplete the little emergency fund they had. Building it back up is her top priority, though it’s not as easy as it was when they were a two-income household. Inspired by the savings app Acorns, they round up their spending to a whole number every month, usually putting away about $100.

Their housing and grocery costs alone are almost $3,000 a month. Haunted by an unexpected $800 electric bill last winter, Wade fears they’d have to take out a loan if it happens again.

“I remember everyone telling me it was more affordable to own a house than to rent,” she says. “Which I’ve found, in some ways, is true, but then in other ways, not so much.”

Also the first in her family to attend college, Wade graduated in 2023 with her associate’s degree to set herself up for better-paying jobs. So far, however, she says it’s been a waste of time and money. She has $8,000 in debt, and some jobs in her area that don’t require a degree pay more than she was making at the bank.

“It was pointless for me to get my college degree if it didn’t get me anywhere, especially when we had to pay to have it,” Wade says. “I only know so many ways to grow our wealth.”

Despite their differing economies, younger Americans are learning about wealth through their parents

Owning a home has historically been more lucrative than renting. Homeowners’ median net worth is 38 times the net worth of renters, according to the Federal Reserve’s most recent Survey of Consumer Finances from 2022. The majority of Americans — even younger ones — consider homeownership a key component of the American dream.

But whether it’s facing unexpectedly expensive maintenance costs or overpaying for housing, younger Americans who own a home are more likely to face a financial-related regret about their purchase, at 45 percent for Gen Zers and 36 percent for millennials, versus 26 percent of Gen X and 22 percent of baby boomers.

“It’s a mantra that’s everywhere: Homebuying is a pathway to wealth,” says Mariel Beasley, co-founder of the Common Cents Lab, a behavioral science financial health lab at Duke University. “The sense that, ‘I will never have the wealth path that my parents had’ is largely because of this narrative. They hear stories that their parents bought a house for $70,000, and now it’s worth $600,000.”

They may not feel like their playing fields are equal, but Americans’ perceptions of money are closely tied to their parents. Friends and family were the most common source Americans turned to for financial advice in 2023, but even more so for Gen Z and millennials, at 44 percent and 36 percent, respectively.

Older generations are more likely than younger generations to indicate that their parents didn’t try to prepare them for the road ahead, Bankrate’s latest study shows. About a third (34 percent) of Gen X and baby boomers say their parents did not teach them how to build financial wealth, versus 1 in 4 Gen Z and millennials (25 percent).

But even so, differences in economic circumstances can get lost in translation when older generations try to give young people financial advice.

“A baby boomer parent who’s looking at their millennial child and using the lens of, ‘Well, by now, you should’ve bought a house, and if you’re not, then you’re in trouble,’ is using the lenses and the norms of what success looked like during their time of growing up,” says Megan Gerhardt, who is a professor at the Farmer School of Business at Miami University specializing in generational differences. “If you fast-forward to the millennial generation, norms have shifted dramatically.”

Financial experts also say it’s a widespread misconception that homeownership is a requirement to build wealth. Americans who started investing just $200 a month at 22, for example, could have over $1.2 million by the time they turn 70, assuming returns that end up averaging 8 percent annually over time, calculations from Bankrate show. Even 10 years later, they could amass nearly $36,000 in wealth.

“Delaying homeownership in order to build a solid financial foundation is a prudent move,” McBride says. “As is investing in your career and future earnings potential, rather than jumping into homeownership at a time of high prices, high mortgage rates, limited selection and before you’re really ready.”

Thanks to technology and grit, younger Americans are prioritizing their careers and favoring investing

The journey may look different than it did for their elders, but many younger Americans are still taking steps in the right direction for building wealth, McBride says.

“Lifespans are longer and many things happen later than they used to: marriage, kids and even homeownership,” he says. “Millions of millennials with those habits have been buying homes — later than perhaps originally envisioned — but skipping right over the starter home.”

For starters, they’re prioritizing their careers. Gen Z and millennials were the generations most likely to say they were planning to take career action by March 2024 and to have already made career moves by March 2023, whether that’s asking for a raise or hunting for a new job, a Bankrate poll found.

Bolstered by an aptitude for technology, Gen Zers and millennials (at 53 percent and 50 percent, respectively) are also bringing in extra income through side hustles, versus 40 percent of Gen Xers and 24 percent of baby boomers, according to a May Bankrate report.

“Having witnessed corporate downsizing and economic instabilities, Gen Z holds significant skepticism toward corporations, a sentiment further intensified by the looming possibility of a recession,” says Holley Cary, CFP, vice president and senior financial planner at First Horizon Advisors. “Whether through a side hustle, influencer endeavors or embracing a self-employed lifestyle, Gen Z is exploring potentially lucrative and independent opportunities.”

Stable income can lead to steady retirement contributions. Younger generations were more likely to say they contributed more, not less, into their retirement accounts in the 12 months since August 2022, a Bankrate survey published in September found. They’re also more likely to say they are ahead of where they think they should be, at 23 percent and 21 percent for Gen Z and millennials, versus 11 percent of Gen Xers and 9 percent of baby boomers.

Even Bankrate’s newest poll demonstrated younger Americans’ interest in investing. About a third (32 percent) of Gen Z and millennials say they wish they knew more about investing as a way to build wealth, versus 22 percent of Gen X and baby boomers. Gen Z and millennials (at 33 percent) are also more likely than baby boomers and Gen X (at 26 percent) to say building financial wealth is currently a priority for them.

Saint Louis Fed researchers Ana Kent and Lowell Ricketts have noticed that younger Americans have an inclination for investing. They’re more likely to be saving for retirement than older generations at their age, a feat that could be due in part to the decline in pensions. Yet, roughly 23 percent of those under the age of 35 directly owned stocks in 2022 compared with about 11 percent for the age group in 1989, the Fed’s latest Survey of Consumer Finances showed.

Younger Americans have also quickly regained a piece of the wealth pie. Massive gains in household net worth tied to ballooning asset prices and fiscal support helped the median net worth for those under the age of 35 soar 143 percent between 2019 and 2022, a record, Kent and Ricketts say.

“For this group — millennials and Gen Z — it’s a great time to have an influx of wealth and excess savings because you have a long time-horizon ahead of you,” says Ricketts, a data scientist at the St. Louis Fed’s Institute for Economic Equity. “Where this money is going, we don’t really know. We’re going to continue exploring that.”

‘This should not be the norm’

At 15, Jareen Imam started her first job. At 20, she bought her first stock. Long before apps like Robinhood or WeBull entered the market to usher in a new era of democratized investing, the Jersey City resident remembers having to call her brokerage firm — the only way to make a trade.

Now 35, Imam is still consistently investing, working her way up from $100 a month those 15 years ago to roughly $1,000 a month now. Priced out of the housing market, she considers it her primary wealth-building strategy. She’s also picked up four side hustles and job-hopped three times so far in her career, scoring 30-40 percent raises with each move from a starting salary of $29,000.

“I only had a few thousand in the bank, and I couldn’t afford to buy one of those foreclosed homes. I did the next best thing I thought I could,” says Imam, who graduated college during the Great Recession. “This should not be the norm. You shouldn’t have to do all of these things to support yourself. There’s so many moments where I have cried to my boyfriend or my mom and been like, ‘I’m so tired.’”

Imam says she wouldn’t have known how to invest without her parents. Before they immigrated to the United States from Bangladesh, her mother taught economics and her father was a banker. Her mother eventually went back to teaching, but her first job in the U.S. was as a bookkeeper.

“She did the family finances,” she says. “She put us on a strict budget and was smart about how we spent our money.”

Her father found a job as a teller, then as a car salesman, and eventually worked his way up to open his own grocery store. Around the dinner table, Imam remembers observing highbrow discussions about the importance of the middle class or tutor sessions that her mother gave to other local immigrant children for the math SAT exams.

But no event has influenced her life more than her father’s sudden death when she was 10. The loss wasn’t just a devastating personal loss — but a financial one. Of her two parents, he brought in the highest income.

A passionate artist since childhood, Imam remembers painting on inside-out cereal boxes, afraid to ask her mother for more supplies. They bought food in bulk at Sam’s Club and never again went on vacation or out to eat.

It’s such a weird experience to be so inherently aware of the cost of things at such a young age. My mom used to have this saying that it takes a lifetime to build wealth and seconds to lose it all. You live with this constant poverty mindset that anything can happen, and at any time, you might go back to zero.

— Jareen ImamNew Jersey resident

The one advantage her mother did have, she says, was an easier economy. Her parents bought their South Florida home in the 1980s for $80,000. Her mother never had to work a side hustle and stayed a teacher her entire career, her loyalty rooted in its stable pay and benefits.

“It doesn’t mean she didn’t have ups and downs in the economy, but gathering wealth and assets was a lot easier,” Imam says. “If you have an entrepreneurial spirit, the resources and the drive, there’s a lot of ways to make money nowadays. But in the end, it’s never going to be the kind of major asset as owning a home or having a great job with benefits that are stable.”

The brain has a negativity bias, especially when it comes to money, Beasley says. Research about the psychological impacts of financial losses on children, for example, shows they remember stories about their parents losing their houses or jobs more prominently than stories of them later doubling their wealth.

Even Kent and Ricketts attribute the negativity younger Americans feel about the economy to lingering trauma from the massive recessions that defined their formative years — the coronavirus pandemic included.

Imam knows growing wealth is bigger than just her. Wealth leaves a footprint across generations. It will allow her to care for her mother as she ages, and it could influence the way her family feels about their finances, too.

“I’m so determined to have wealth, but I know that my family depends on me,” she says. “As people struggle to pay rent, as people struggle to buy food for their families every week, I think about how that’s going to impact their kids and how they view money and their future and what they dream to become.”

Methodology

Bankrate commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,233 U.S. adults. Fieldwork was undertaken between Dec. 18-20, 2023. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.