Yahoo Finance Wealthy Millennials Are Now Outpacing Their Boomer Counterparts: How Did They Get So Rich?
As a whole, boomers are still a wealthier generation than millennials; but among the richest members of these generations, millennials are outpacing their boomer counterparts. While the average millennial has 30% less wealth than the average boomer did by age 35, the richest 10% of millennials are now about 20% wealthier than their boomer counterparts were at the same age, the Financial Times reported.
Here’s a look at how the richest millennials got so rich, and what this means for the greater socioeconomic landscape.
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How Rich Millennials Became So Wealthy
Many millennials who have achieved great wealth didn’t do so on their own. A large portion of the richest millennials inherited their wealth from previous generations, and have utilized this financial leg up wisely.
“There are various studies that have documented the great wealth transfer from the boomer generation, but what isn’t always highlighted is the compounding effect that receiving an inheritance can make on one’s wealth,” said Marguerite Weese, COO of the Emerald Family Office & Advisory and national director of family legacy strategies at Wilmington Trust.
Weese noted that there are a number of ways millennials could use their inheritance to further boost their wealth including the “ability to have access to and pay for a better education, which may lead to a better-paying job; ability to get a mortgage for a house; access to investment vehicles; access to capital to start your own business; ability to put money away in retirement [savings accounts]; access to top-tier advisors — attorneys, accountants, wealth managers, etc. — all of whom can help preserve and grow wealth; [and the financial freedom to] take more risks that may lead to a larger financial reward.”
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What This Means for the Greater Socioeconomic Landscape
This new generation of ultra-wealthy could shift the socioeconomic landscape. For starters, the wealth gap among millennials could be significantly wider than it has been for previous generations. As the top 10% of millennials gain unforeseen levels of wealth, many other members of this generation are struggling financially.
“Because receiving an inheritance allows recipients to build additional wealth, this could lead to an increased wealth gap within the millennial generation,” Weese said.
There’s also a shift in the avenues to achieving great wealth.
“We may see a significant shift among the wealthy from being mostly self-made wealth creators to more heirs who inherited their fortunes,” Weese said.
When wealth is passed down rather than earned, it could also alter how people manage this wealth.
“There is a psychological safety that can accompany having access to wealth, and we may see that show up in life decisions — for example, how much to work, what jobs to take, what financial risks to take, how much and where to spend money, etc.,” Weese said.
How Rich Millennials Can Best Manage Their Wealth
The fortunate millennials who find themselves in the top 10% of their generation should take steps to ensure they are managing their wealth responsibly.
“It can be helpful to view wealth as a tool, not a destination,” Weese said. “Millennials should first and foremost ask themselves what their life goals and objectives are, and then think about what financial goals they need to set to achieve those life objectives.”
Weese recommends approaching wealth management through the lens of three levers.
“First, earning: How much can and does the individual need to earn to reach their financial goals?” she said. “Second, saving and investing: How much does the individual need their assets to grow to meet their financial goals? Third, spending: Breaking down discretionary versus nondiscretionary expenses and understanding the minimum cost of the individual’s lifestyle is important should the individual ever need to pull back.”
Weese said that wealthy millennials should ideally seek professional help with managing their money.
“Having the right team of advisors — accountants, attorneys, wealth managers — around a wealthy millennial can make a significant difference in preserving and growing wealth,” she said.
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This article originally appeared on GOBankingRates.com: Wealthy Millennials Are Now Outpacing Their Boomer Counterparts: How Did They Get So Rich?
