The narrative surrounding millennials has shifted considerably over the years. Once deemed lazy and entitled, this generation has now proven itself to be the most financially capable thus far, albeit with some caveats. Recent research from the St. Louis Federal Reserve indicates that millennials possess approximately $15.95 trillion in combined wealth, a remarkable leap from $3.94 trillion just five years ago. This significant increase begs the question: why do so many millennials still not feel wealthy, despite the impressive figures? Part of the answer lies in the mismatch between net worth and daily financial comfort—often referred to as “phantom wealth.”
Phantom wealth refers to assets that appear valuable on paper but lack immediate liquidity. For millennials, real estate investments such as homes and retirement accounts are prime examples. While the value of these assets can surge—American housing prices skyrocketed by 44% from 2019 to 2022—the tangible benefits of these high valuations are often elusive. Financial expert Michael Liersch emphasizes that unless a homeowner plans to downsize or liquidate their primary residence, the increase in property value cannot be easily accessed or utilized. This financial reality leads to a paradox where, despite a substantial increase in wealth, many millennials struggle to feel financially secure.
Interestingly, the St. Louis Fed’s findings reveal that millennials have seen a considerable uptick in wealth compared to previous expectations. For older millennials aged 36 to 45, wealth is approximately 37% above projections, whereas younger millennials (26 to 35) and older members of Generation Z are observing an increase of 39%. Furthermore, reports from TransUnion suggest that this generation is more optimistic about their earning potential, with many indicating a rise in income over recent months. However, the notion of HENRYs—high earners, not rich yet—paints a more nuanced picture of millennials’ financial landscapes.
Despite achieving impressive wealth figures, millennials grapple with the challenge of feeling financially secure. As economic conditions shift, the burden of managing financial risk has largely fallen on individuals, exacerbated by soaring inflation rates. This has resulted in more young adults identifying as HENRYs, a term that underscores their high incomes juxtaposed against a backdrop of overwhelming expenses. Compounded by concerns such as student loan debt, significant mortgages, childcare costs, and health care expenses, millennials find themselves in a precarious position. According to financial planner Sophia Bera Daigle, the tighter cash flow makes it difficult for many to save or invest for the future, maintaining a constant feeling of being overburdened.
Interestingly, experts suggest that financial well-being is subjective; it doesn’t solely depend on having high income or wealth but more significantly on living within one’s means. CFP Kamila Elliott notes that as fixed expenses rise—with costs for necessities such as housing and groceries soaring—individuals often feel stretched thin regardless of their income level. As a result, the perception of one’s financial standing frequently hinges on the ability to manage expenditures wisely and maintain a healthy cash flow. For millennials, taking charge of their finances requires the difficult task of reassessing priorities and potentially cutting back on discretionary spending.
Despite the prevailing sense of difficulty, millennials are making strides toward financial stability. Understanding how to navigate the complexities of wealth management in today’s economy is crucial. Financial literacy and planning can bolster resilience against headwinds such as inflation and economic uncertainty; hence, many millennials are turning to financial advisors to guide their financial journeys. Creating a distinct financial plan that encompasses long-term goals, savings strategies, and budget adjustments is vital for this generation’s ability to redefine wealth.
While the perception of financial health among millennials may still lag behind their increasing wealth figures, it is essential to acknowledge the progress they have made and to confront the structural challenges that persist. As they continue to carve out their financial identities, balancing asset ownership with stable cash flow and making informed decisions will be key in transforming their felt experience of wealth into a more tangible reality.