There are plenty of news articles about how millennials save and invest their money. What’s missing, however, is a clear understanding of what this generation is actually doing with their finances.

The Wall Street Journal has raised concerns about millennials’ low saving rates due to increasing student loan and credit card debt. In contrast, the personal finance site NerdWallet highlighted that some millennials are saving significant amounts for retirement.

Reports also differ on their homebuying behavior. Real estate news site The Real Deal noted that high student loan balances prevent millennials from buying homes, whereas Business Insider mentioned that millennials are delaying their first home purchases and often buy more expensive homes when they do.

Given the lack of consensus in these articles, we aim to offer a snapshot of millennials’ household finances. To understand how millennials compare to the previous young generation, Generation X, we looked at the finances of millennial households in 2016 compared to Gen X households in 2001. We analyzed the average assets and liabilities using data from the Survey of Consumer Finances (SCF).

Our analysis shows that both financial and nonfinancial assets (like homes) have decreased for millennials compared to Gen Xers in 2001. Millennials also have slightly more debt on average due to higher student loans, even though they have less mortgage and credit card debt.

A Lower Net Worth

The average value of total assets is lower for millennials than it was for Gen Xers. As shown in Figure 1, millennials had an average of $162,000 in assets compared to Gen X’s average of $198,000. Financial assets dropped from an average of $65,000 in 2001 to $50,000 for millennials. Nonfinancial assets, including homes, decreased from an average of $133,000 to $111,000.

Part of this decrease in nonfinancial assets is due to housing. Millennials had an average of $69,000 in their primary residence, compared to Gen Xers’ $78,000. However, millennials had a slight advantage in retirement account balances, averaging $15,500 compared to Gen X’s $13,600.

Millennials carried slightly more total debt, averaging $72,000 compared to Gen X’s $67,000. While the total debt levels were similar, the composition differed significantly. Average student loan debt increased from $4,200 for Gen X to $14,700 for millennials. Due to lower housing assets, mortgage debt for millennials was also smaller, averaging $43,000 compared to Gen X’s $49,000.

Interestingly, millennials had a lower average credit card debt, with an unpaid balance of $1,800 compared to Gen X’s $2,700 (not shown in Figure 1).

In summary, millennials’ average asset positions were lower, while they held slightly more debt, leading to an average net worth of $90,000 for millennials compared to $130,000 for Gen X.

A Robustness Check

The prices of some asset categories may have changed significantly from 2001 to 2016. Although the SCF dollar values are adjusted for inflation to 2016 dollars, this does not account for changes in the relative prices between asset categories that could make one category disproportionately more expensive in one year than another.

To address this, we performed a simple robustness check. For each asset category, we calculated the ratio of the average value for each generation to the average for all households in those years. The results are shown in Figure 2.

These ratios represent a percentage of the average value for all households. For instance, a ratio of 0.2 indicates that the generation held assets or liabilities equal to 20 percent of the average value across all households in that year.

In Figure 2, the orange bar in the total assets category represents the ratio of Gen X’s average total assets to all households in 2001, while the blue bar represents a similar ratio for millennials in 2016.

In this relative measure, millennials had a significantly smaller asset ratio (21 percent) than Gen Xers (32 percent). The ratios for financial assets, nonfinancial assets, and housing for millennials each dropped about 10 percentage points, and the retirement account ratio fell by about 5 percentage points.

On the other hand, the average debt ratio was lower for millennials. Compared to Gen X, the total debt and mortgage ratios were down about 15 and 23 percentage points, respectively. However, these lower debt ratios were outweighed by lower asset ratios, pushing millennials’ net worth ratio down to 13 percent from Gen X’s 24 percent.

Changing Priorities

The net worth of the youngest working generation has decreased since 2001, as they hold fewer assets and more debt on average.

However, this does not necessarily mean millennials are making poor financial decisions. Society is transitioning as the life cycle extends. People are living longer and retiring later, leading to various demographic shifts.

Compared to previous generations, more millennials have chosen to delay entering the labor market to pursue higher education. The labor force participation rate for 20- to 24-year-olds dropped to 70.5 percent in 2016 from 77.1 percent in 2001. Over the same period, the percentage of 25- to 29-year-olds with a college degree increased from 28.4 percent to 36.1 percent. Additionally, more young adults are living with their parents, and the median age at first marriage has been increasing for both men and women.

Millennials are spending more time in school and delaying major life events, which explains why they hold lower levels of assets. They have had less time in the labor force, and fewer have moved out on their own, contributing to lower residential assets. However, they show a higher tendency to save for retirement and avoid credit card debt.

While millennials have higher student loan debt, education is often an investment that improves productivity and future earnings. Given these factors, concerns about millennials’ spending and saving habits may be partially alleviated, as they will likely have more time in the labor force to build assets and pay off debts.

Endnotes

1. We define millennial households as those whose heads are between ages 20 and 35 as of 2016, and Generation X households as those whose heads were in the same age range in 2001. Our definitions roughly match those commonly referenced.

2. The survey provides cross-sectional data on U.S. households’ demographics, incomes, balance sheets, and pensions every three years.

3. In addition to average asset and liability positions, we also compared median positions across generations. The results are similar to the averages. However, the median levels of housing assets, retirement account balances, and mortgage debt were zero, making comparisons difficult. For example, more than half of millennials had no housing assets.

4. The SCF data are inflation-adjusted to 2016 dollars for direct comparison. Dollar amounts of $20,000 and higher are rounded to the nearest $1,000; amounts below $20,000 are rounded to the nearest $100.

5. Other underlying factors may bias the results shown in Figures 1 and 2. However, we see consistent patterns across both figures, indicating that millennials hold lower levels of assets and have lower net worth than Generation X on average.

6. Labor force participation data are from the Bureau of Labor Statistics, and demographic data are from the Census Bureau.