People Under 40 Have Very Little Wealth

Younger People Have No Wealth

People under 40 have a very small percentage of the wealth in America. As you can see from the chart below, it’s down from about 12% in 1990 to about 6% in 2020. That’s due to a few reasons. Firstly, there are more older people than 31 years ago. Older people have had decades to generate wealth. Even starting with $10,000 will get you far if you compound it long enough.

Secondly, younger people are entering the workforce later in life. It’s getting more difficult to make a good income as a teenager. There’s no doubt that some people don’t actually use what they learn in college at their first job, but the system is set up that you need to go to college for most professions. Once employers stop caring about degrees, people will stop going to college. We aren’t at that moment yet in the majority of fields.

Thirdly, young people have student debt. Many young people don’t pay off their student debt until their 30s. The table below is a look at the average millennial net worth by birth year. About half of millennials have a negative net worth. Most people who graduate college eventually get out of the debt hole and generate wealth.

Source: The College Investor

On the negative side, it’s unfeasible to have a child in your 20s if you have a negative net worth. It’s a tight squeeze to have all your children in your lower 30s which is partially why the birth rate has been dropping. Millennials will largely end up being fine economically especially if they graduated college. However, it’s increasingly likely that this is the start of an eventual peak in the population unless policy attempts to resolve some of the issues facing young Americans, or at the very least not make things worse.

2021: Massive Market Shift

This year is very different than last year because cyclical value stocks are doing very well. That’s in part due to the rising 10-year yield. It’s also due to the strong vaccination program and the valuation mean reversion. As you can see from the chart below, non-profitable tech stocks and companies with negative earnings and positive sales growth in 2020 are almost perfectly correlated. That’s because most of the companies that lost money and grew sales last year were in tech. These two groups have declined in the past few weeks. They became crowded trades. The valuations got too high. They are in a tough spot because demand growth for software will fall and they have tough comps.

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Disclaimer: The content in this article is for general informational and entertainment purposes only and should not be construed as financial advice. You agree that any decision you make will be ...

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