Millennials' Net Worth Has Quadrupled, but Some Call It 'Phantom Wealth'

Millennials' collective wealth has surged to $15.95 trillion, yet many don't feel truly wealthy.

Millennials have been subject to criticism in the past for being lazy or entitled, but their financial trajectory has proven to be far from that. Despite reaching important milestones later than previous generations, millennials are now wealthier than their parents were at the same age.

According to data from the Federal Reserve and an analysis by the St. Louis Federal Reserve of 2022 statistics, millennials’ collective wealth has ballooned to $15.95 trillion, up from $3.94 trillion just five years ago.

Yet, despite these gains, very few millennials would consider themselves truly wealthy. The term “phantom wealth” has emerged to describe the gap between apparent wealth on paper and the feeling of financial security.

Much of millennials’ wealth is tied to illiquid assets like real estate or retirement plans, which have no direct impact on daily cash flow. Many in this generation have benefited from a strong job market and rising wages, using their increased incomes to purchase homes. Between 2019 and 2022, home prices surged by 44%, driving up millennials' wealth, primarily through real estate.

As a result, the median wealth of millennials more than quadrupled during this period. However, homeownership doesn’t provide the same financial cushion as other types of investments. As Michael Liersch, head of advice and planning at Wells Fargo, pointed out, unless millennials are willing to downsize, they cannot easily capitalize on the increased value of their homes.

The phenomenon of "phantom wealth" is not without merit, even if the term itself is debated by some economists. Columbia Business School's Brett House calls the term nonsensical but acknowledges that millennials have experienced a significant shift in their financial standing. For instance, the median wealth of older millennials (ages 36 to 45) exceeded expectations by 37%, while wealth for younger millennials and older Gen Zers (ages 26 to 35) surpassed expectations by 39%.

Millennials also report that their incomes have increased in recent months and anticipate further earnings growth in the year ahead, according to a separate report by TransUnion. But despite these positive trends, inflation and economic instability have contributed to many millennials still feeling financially insecure. This has led to the rise of "HENRYs" — high earners, not rich yet.

This issue isn't unique to millennials or Gen Z. The struggle to feel financially comfortable is a challenge faced by all generations, especially with the growing responsibility on individuals to manage risks related to employment, healthcare, and retirement, all amid rising living costs.

For many millennials, financial stress is also exacerbated by larger student loan balances, mortgages, car payments, and higher childcare expenses. According to Sophia Bera Daigle, founder of Gen Y Planning, millennials often struggle with tight cash flow, making it difficult to set aside extra money for long-term goals. Despite their financial progress, many still feel there's much more to accomplish.

However, experts say that financial security often comes down not to how much money you have, but to how well you manage your expenses. CFP Kamila Elliott, co-founder of Collective Wealth Partners, explains that rising fixed costs have led to feelings of being overextended. To feel more financially secure, she advises clients to cut back on discretionary spending, such as dining out or vacations, to make room for savings and have more money at the end of the month.