Millennials are positioned to be the wealthiest (and happiest) generation yet
I’m visiting my family in California this weekend, and everything from the beautiful weather to the leisurely schedule has been perfect. Best of all, I’m spending time not only with my immediate family, but with my grandparents, cousins, and other relatives who I haven’t seen in over a year. One of the lively discussions that arose out of this meeting was about the differences between our multiple generations and whether up-and-coming millennials were better or worse off than their predecessors.
Just in case you haven’t heard, the term “millennials” refers to Americans born in the 1980s and 1990s, and there are a number of stereotypes that have emerged about us (yes, I’m one of them). Aside from news stories about our addiction to the Internet and social liberalism, one of the most prominent preconceptions about millennials is that we are in debt, jobless, and living with our parents. While there is some truth to this (about 37% of us are unemployed or not working and one in eight of us live with our parents), the handwringing and worry about whether we will exceed Gen X’s achievements is misplaced.
In fact, millennials and their children are the best-positioned generation of all time for achieving wealth and the happiness that comes with financial security. To understand why, we have to look back several centuries to gain a better perspective on human progress. At Monte Largo, we advocate for current and future clients to achieve financial independence at an early age, so that their money is working for them rather than the other way around. But this strategy is unfamiliar to many people because it wasn’t possible until very recently.
Prior to the rise of “the Greatest Generation” in the early 1900s, most Americans worked in agriculture or manufacturing. Farmers spent the entire spring, summer, and fall to build stores of food, clothing, and fuel to last them through the harsh winters, when living essentials were hard to acquire. By the end of winter, the savings and supplies had run out, and families had to start over each year. Manufacturing laborers worked in factories to earn meager wages to buy the same essential goods. These families often spent half of their monthly income on food alone. “Retirement” was rare.
By the end of the 20th century, the American economy had been transformed as the technology and service sectors dwarfed agriculture and manufacturing. The cost of food plummeted to about 5% of monthly income. How was this possible? The cause of America’s fantastic growth in wealth is our human capital. Americans are exponentially more productive today than we were 100 years ago because we’ve learned how to do many processes faster and more efficiently than in the past.
Today’s average worker can provide value far more efficiently than her great-grandparents. While Earnest and Mildred worked for months to earn a year’s living wage, today Brandon and Ashley can earn the same amount in a matter of hours or days. America’s human capital continues to pose a nearly insurmountable challenge to any other nation. If you doubt that, remember that nearly 235,000 Chinese students enrolled in US universities in 2013, while only 14,887 Americans studied in China in 2011-2012, and almost none of those were seeking a four-year degree.
Millennials are highly educated and socially connected. In terms of wealth, we can save and invest our profits more efficiently and cheaply than at any time in history — we just have to make that choice. In short, the economic challenges we face are nothing compared to the unprecedented advantages our generation enjoys. Despite the societal problem of income inequality, with the bottom quintile of Americans enjoying a smaller slice of the economic pie, the overall pie is still growing quickly enough for even middle and low income families to save for retirement. They may not amass as much wealth as their rich neighbors, but the mere fact that Americans worry more about their relative wealth (how much more money you have in the bank than the person next to you) than their absolute wealth (how much money you have in the bank compared to your living expenses) indicates how privileged we are economically.
While we must continue to address some serious economic problems that affect all generations including millennials, I’m positive that the world has never before presented so many opportunities and so much luxury for Americans entering adulthood. We shouldn’t waste it wishing that it could have been better. Instead, we should be working to set up the next generation for continued success and happiness. Prove me right, fellow millennials.
Alejandro is a financial planner with Monte Largo Financial Advisors LLC.