Apparently everyone’s going to be a millionaire. Well, a lot the millennials seem to think so, anyway
Seventy three percent of male millennials surveyed believe they’ll become millionaires Wow. That’s especially interesting when you compare it to the just 38% of females saying the same thing. Even so, the responses added up to more than half of the respondents (all millennials) believing they’ll be millionaires at some point in their lives.
Of course, they could be talking about retirement savings. In that case, if they started saving early on, it’s possible that they could grow their net worth to the $1 million mark.
Except they’re not necessarily starting early. The average answer for “age to start saving for retirement” was 36. But somehow the men think they’ll retire at 53 and women at 59.
Again, these are averages. And plenty of millennials have started saving before 36. In fact, 38% reported already saving for retirement. Since even the oldest millennials are only 38, that points to a fair number of respondents having already started saving. (Just more proof that millennials are a money-minded generation.)
But still, it’s troubling to hear these expectations since half of the people surveyed reported having credit card debt, with another 40% also reporting car loans and 36% reporting student loans. The average debt was $15,000.
Granted, you don’t have to pay off all of your debt before you start saving for retirement. In fact, it’s not even advisable to do so. (Which is rather hypocritical coming from me. But what I did vs. what I know to be smart are sometimes two separate things.) The point is that having the debt weighing them down means opportunity costs, specifically when it comes to investing.
Not that they seem to be letting debt stop them completely from investing. Half of respondents reported investing in the stock market.
And apparently they’re more likely to have a plan than other generations. In a GoBankingRates survey, 69% of millennials who expected to be millionaires confirmed that they had a plan of attack. That’s more than any of the other generations surveyed.
So, okay, maybe millennials are FIRE-ing up a storm, paying down their debt quickly, and well on their way to $1 million (or more) in retirement savings.
But probably not.
Because according to a CNBC article millennials are actually worse off financially than their parents were at their age. They tend to have lower net worths (which would include retirement savings, of course) and are less likely to own houses than previous generations at the same age.
And while seven in 10 see themselves as savers rather than spenders, perception isn’t always reality.
For example, millennials apparently see themselves as much more financially savvy than they are. In a 2017 study, 69% of millennials gave themselves high marks for financial know-how, but only 8% demonstrated a high level of knowledge. And only another 24% demonstrated a very basic financial understanding of how to manage money.
So in that case, how likely is it that their perception of their future as millionaires is accurate? Not very.
That said, there’s still time for them to fulfill that goal if they start maximizing their retirement savings now and, ideally, learn to invest.
Do you think you’ll be a millionaire? Do you have a plan to get there?
Yet Another PF Blog says
It depends on how a few life events go (like finding a new job, haha), but we can reasonably expect to be millionaires within 2-3 years if you include home equity. Our plan is simply just keep saving as we have been, though our path has been relatively fortunate and easy: no student debt for either of us, a tech salary, jumped into the housing market halfway into the upswing post-recession.
For the other millennials we know, there’s a huge gap between those doing really well financially and those doing okay. I would say, for our friends that are in tech, around half will probably hit seven figures by their thirties. For our non-tech friends, I don’t know whether any will be millionaires. Everyone’s spending was pretty level when we were all fresh out of college, but now, about five to ten years out, the class divides are becoming a lot more apparent.
Yet Another PF Blog recently posted…Financial Update – June 2019
Abigail says
Yeah, I think the divide is going to always cause some clashing between average millennial expectations and reports as to how millennials are doing. And of course people in tech are going to have a much easier time hitting the million-dollar mark at a young age. And retiring young if they so choose.
I get that home equity can be a decent chunk of it, though that doesn’t explain how they think they’re going to retire relatively early (53 and 59, I believe I said for men and women). I guess the lack of a mortgage payment would help, so perhaps a lot of millennials are looking to pay down their mortgages quickly? To build equity and raise their net worth.
This study just clashes with a lot of what we know about millennials. Or rather what the media reports about millennials, which doesn’t seem to take those into the tech industry as into account as the ones on the lower end of the divide you mentioned. I guess the problem with averages rather than medians is that you don’t get a sense of which were the most common answers. That’d be helpful in a situation like this.
FreedomFiter says
I intend to be a millionaire! But it’s going to take me a long time to get there. 🙂
Abigail says
Definitely a good goal — and one worthy of your name. But I’m glad you recognize it’s a long process. A very possible one if you make a decent income and are careful with your money. But a long one nonetheless (unless your salary is really impressive, that is).
Sarah says
I wonder if the weird, contradictory results are due to the fact that a.) a million dollars is not as much as it used to be, and b.) a sign of wealth inequality among millennials. We are older millennials who have done extremely well, but there is also a cohort who graduated into the recession and are still earning poverty-level wages (we have some friends in this boat).
Abigail says
Excellent points. There are some millennials who have rebounded admirably — a lot of them in the tech field, I think — and some are still struggling or were struggling until recently. Still, I find it interesting that the age to save for retirement and the expected retirement ages were so close together. I know these are averages, but it’s still startling.
FrugalStrong says
We already are. 😊 We’re 42 and 49. I think its been 4-5 years and we crossed the $2 million mark last year. We hit the first million while still having mortgage debt but have been debt free (including our rental properties) since early last year and it’s crazy how fast money piles up when the equivalent of 3 mortgage payments are now going to savings. Our plan was and is to live way below our means, max out every retirement vehicle available, and avoid/pay off debt. We both grew up in financially insecure households and put ourselves through college so sometimes we have to just stop and high five each other and say “go us!”
Abigail says
Definitely high five yourselves!
Of course, you’re not millennials. The point here is that a lot of millennials are behind where the rest of us were at their ages, but they still think they’ll be millionaires. Of course, as Yet Another PF Blog points out, that could include homes. But even that… I guess eventually the houses will be paid off and therefore part of their net worth. Until then, the equity will probably be minimal as far as contributing to net worth.
Still great that you guys have done so well, though.
FrugalStrong says
It seems like every generation thinks they’re worse off, I don’t know. It seems like it’s just more convenient for some to look for reasons as to why they’re not where they want to be and I also think sometimes people expect to go from high school to amazing career/home/nice car in the blink of an eye. There’s a 15 year range in the millennial generation so it seems odd to compare the experiences of one end (23) to the other (38). Either way, I think no matter what generation you’re in and where you’re at financially, the basic guidance will help one achieve their goals. It’s not exciting, but it works!
Abigail says
I agree that it’s hard to quantify with that broad an age range. But it’s not the generation itself saying it’s worse off. It’s studies saying that these folks are worse off than previous generations at the same age when looking at net worth, homeownership, retirement, etc.
Kel says
I’m a millennial (36 this fall so at the tail end of millennials lol) but my husband is a bit older.
Our net worth is probably $800K including the home equity but we plan to pay down our mortgage while investing maxing out his 401K and our IRA’s and other investments. We have a large income but we also have a big family so it kinda balances out. I will say my husband went back to school later so his work helped fund that, and I did not have student loans. We also have no car payments etc. The mortgage is our only debt.
I listen to Dave Ramsey and started about 5 years ago and that helped me change my spendy ways a bit. I still like nice things but we have the money to pay for them and I always shop sales, Aldi, Costco and we don’t have cable etc. My husband and his parents (immigrants) have always been savers so fortunate in that regard. I am a former spender but much better lol.
Now my brother is almost 33 and he has student loan debt and lives at home and he has the potential to make $60-$70K a year with his degree (administering radiation to cancer patients.) He’s kinda mooching off my parents though so he’s a example of the other end of us millennials 😉
Abigail says
Good example of the range of millennials that are out there. It’s important to be reminded that not all millennials are struggling with student debt anymore. But others are. It’s a mix, which means studies about millennials attitudes can produce these kinds of confusing results, especially compared with OTHER studies of millennials, like the one saying that, on the whole, the generation is worse off than their parents were at the same ages.
Xrayvsn says
I do think there will be a lot of millionaires and a lot of millennials will likely hit 7 figure net worths however if we are talking a few decades from now, the purchasing power of a million dollars will likely be equivalent to someone with a net worth of $500-600k if not less.
Even a million today is paltry in terms of purchasing power of what it used to be able to buy in the 80s.
Abigail says
Well that’s a depressing but probably accurate thought.
Joe says
I think lots of millennials will be millionaires. It’s inflation. In 40 years, a million won’t be that difficult. Just investing in index funds should get any Millenials there. (Maybe…)
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Abigail says
I don’t think inflation is enough to guarantee a ton of millionaires, but I guess time will tell!
Revanche @ A Gai Shan Life says
“Of course, they could be talking about retirement savings.”
So are we talking about millionaires who can reliably and easily access their millions? Because under that definition, I would personally strike out real estate and retirement savings, and in that case, NOPE. We’re many miles away from that type of millionaires. The other way including all assets and liabilities is probably more accurate but yet feels like cheating because it’s not like we’d tap into our retirement accounts or be free of housing expenses even if we did sell our properties because we still need some place to live. And even still, I don’t consider us millionaires until we have at least more than $1M per person in the family (because you know me, I always think of the unit together but also keep a wary eye on the possibility that dissolution might need to happen some day.)
Our financial plan is the same however we define the end result: earn as much as we can, save and invest as much as we can. I started saving a long time ago but that ignores the fact that it was so little as to be nearly non-existent.
Living where we do, it’s really easy to keep feeling like (living like) the country cousins because we do NOT do all the rich people stuff that goes on around here and in some ways, that really helps us continue with our plan because we already know we can’t and don’t want to keep up in all the “usual” ways so we don’t even try.
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Abigail says
Glad you’re able to eschew so much of the rich people stuff. It’s just not worth it generally speaking.
It’s an interesting idea to only consider yourself a millionaire if there’s enough for each person to have $1 million. Not something I’d considered, but like you said dissolution can happen, so I guess it makes sense. I had a friend whose parents were worth at least a million, but they then split up. They even broke up his trust fund, which he was pissed about. Frankly, it probably did him good to struggle, but that’s a story for another day.
Caveman says
To be honest I admire the ambition. If you want to become a millionaire and you work towards it then even if you fail and ‘only’ end up with a half a million you’re likely ahead of the game. You’ll probably have also learned a fair amount about money (making, saving and investing it) in the process which will stand you in good stead.
I also agree with various others…sadly a million ain’t what it used to be.
Caveman recently posted…Why your 30s and 40s are an optimal age to start towards Financial Independence
Abigail says
It’s true a million ain’t what it used to be, especially if we take home equity into account. With millennials needing to buy $300,000+ homes, just paying off your mortgage will get you 1/3 of the way there. I guess I just always think in terms of cold hard cash (or, really, investments). But you’re right that striving for that goal isn’t a bad thing at all. As long as not reaching it doesn’t bring about complete despair.
Bethany D says
I’m one of the oldest millennials and (Lord willing) we have a decent chance to be “millionaires” simply due to retirement savings plus house equity. We won’t actually be able to spend anything until we’re retired, and then no more than 4%~ish a year, so there’s not much point in bragging about it. But I’m sure it will still feel very cool!
Abigail says
$1 million, especially if we’re talking in just retirement savings, would be pretty darn cool indeed! Even if the $1 million includes home equity, that’s still a pretty impressive amount.
becca says
“inequality is getting worse” would be expected to play out as “Millennials have extremely heterogeneous wealth”, so that factor may explain the discordant aspiration: reality.
However, I think it’s also probably heavily influenced by “what stories do we tell ourselves”. My factoid of the day is: 12% of Americans rate their diets as “somewhat unhealthy” or “very unhealthy”… 13% of Americans drink soda pop “many times a week” or “every day” and 16% eat fast food “every day” or “many times a week”.
There is a real disconnect between what people think about themselves and what they do.
Overall, I don’t think most people are good at mentally thinking about inflation. So I don’t think this explains why *most* Millennials will say they will be millionaires. But this is why I expect to be a millionaire: I was born in ’83, and thus my full retirement age is 68 in 2051. If we have a relatively modest average rate of 2% inflation, a million in 2051 is worth about 500,000 in today’s money. I’m at about 100k now, I think over the next 32 years I can put away the equivalent of 400k more (in today’s money, more in nominal of course). Thus even without market returns, I’d hit “millionaire on paper”. I do not in any way expect to have the lifestyle many people imagine when they hear “millionaire” though!!!
As I was reading your post I really wanted to have the financial literacy questions for reference. So here they are:
1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5
years, how much do you think you would have in the account if you left the money to grow?
o More than $102
o Exactly $102
o Less than $102
o Do not know
o Refuse to answer
2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2%
per year. After 1 year, how much would you be able to buy with the money in this account?
o More than today
o Exactly the same
o Less than today
o Do not know
o Refuse to answer
3. Please tell me whether this statement is true or false. “Buying a single company’s stock
usually provides a safer return than a stock mutual fund.”
o True
o False
o Do not know
o Refuse to answer
4. A 15-year mortgage typically requires higher monthly payments than a30-year mortgage, but
the total interest paid over the life of the loan will be less.
o True
o False
o Do not know
o Prefer not to say
5. If interest rates rise, what will typically happen to bond prices?
o They will rise
o They will fall
o They will stay the same
o There is no relationship between bond prices and the interest rates
o Do not know
o Prefer not to say
If you can get the first three, you beat 76%. If you can get all five, you beat 92%.
(source, and correct answers, here https://www.nefe.org/_images/research/GWU-Financi…
Abigail says
I’m sure on everything but #5. I had to guess and then look it up. (I was correct, at least.) Interesting stuff, though the results of the study are depressing.