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The optimism of youth is something to behold, particularly when it comes to expectations about building wealth.
Give today’s younger generations – millennials and Gen Z – some credit. They’re quite optimistic regarding cobbling together wealth. That’s saying a lot because, like other generations, millennials and Gen Z are enduring their share of challenges and economic strife.
Consider the point that many of the oldest millennials entered the workforce leading up to, during or following the global financial crisis. More recently, younger generations – along with the rest of us – had to deal with the coronavirus bear market and the related economic headwinds. That was followed by a yet-to-be-completed era of rising interest rates and the worst inflation in 40 years –prior to the births of many millennials and all of Gen Z.
Still, people in these demographics remain bullish on their wealth-building outlooks. That also means younger investors need guidance on how to achieve their lofty goals.
What the Survey Says
Data confirms that younger investors are feeling optimistic about wealth. In fact, a substantial majority believe they’ll be “wealthy” at some point in their lifetimes.
“Nearly three-quarters (72%) of Gen Zers believe they’ll become wealthy one day, making them the most financially optimistic generation. Overall, 44% of Americans think they’ll be wealthy in their lifetime, though that’s down from 51% in 2019. The past three years saw millennials’ expectations of wealth drop, from 66% in 2019 to 59% today,” according to a recent MagnifyMoney survey.
Of course, wealthy for one individual may mean something entirely different for another. There was a time when having $1 million in assets would be enough to be considered wealthy or rich, but the Schwab's 2021 Modern Wealth Survey indicates those polled believe that figure is $1.9 million.
“While “wealthy” is a subjective term, most consumers agree it comes down to the ability to live comfortably without concern for finances. Just 23% think wealthiness means being a millionaire, while only 9% believe wealth is associated with driving a luxury car,” adds MagnifyMoney.
On the other hand, there is some financial pessimism out there. Interestingly, it’s found among older generations and, perhaps surprisingly, among those that others would consider to be well off.
“Meanwhile, older consumers are more pessimistic. Just 36% of Gen Xers (ages 42 to 56) and 19% of baby boomers (ages 57 to 76) think they’ll be rich. Men (55%) are also more inclined to believe they’ll be rich than women (34%),” notes the survey. “But while wealth may seem too far-fetched for most, the majority of Americans (55%) think they’ll make more than their parents did. Though Gen Zers (70%) are slightly less likely to think they’ll make more than their parents than they are to think they’ll be rich, they’re still the most optimistic generation.”
Debt Guidance Needed
As has been widely documented, Gen Z and millennials face mountainous student loan burdens, but that’s not affecting their outlooks on debt.
Two-thirds of those polled by MagnifyMoney believe it’s possible to be wealthy and in debt – an outlook that runs counter to much of the conventional wisdom regarding wealth building. Conversely, just 30% of those surveyed say the only debt that’s acceptable on the quest to wealth is a mortgage while just 38% believe being debt free is on par with being wealthy.
Bottom line: There’s nothing wrong ambitious, rosy outlooks on wealth, but it’s also clear some younger investors can benefit from professional guidance when it comes to debt reduction and wealth building strategies.
Related: It Pays to Prioritize Profitability