The young and the broke – 37 percent of young households held zero or a negative net worth in 2009. The median net worth of those 35 and younger is $3,600.
It is hard to imagine a future generation of Americans were those moving forward are actually poorer than the current generation. Yet that is precisely the world we are diving into. Those that purchased homes in the pre-bubble days and also attended college in less inflated times have a massive head start on the current younger generation that is contending with a bursting housing bubble and a financial system that might as well be a roulette wheel. One startling figure from a recent Pew Research report shows that 37 percent of young households hold zero or a negative net worth. This is not a good way to build a healthy financial future. The wealth gap between previous generations is also becoming increasingly large. This narrative ties into the overall systemic pilfering of the middle class.
How large is the net worth gap?
The gap between younger and older Americans has never been so large:
Source: CNN, Pew Research
“(CNN Money) In 1984, households headed by people age 65 and older were worth just 10 times the median net worth of households headed by people 35 and younger.
But now that gap has widened to 47-to-one, marking the largest wealth gap ever recorded between the two age groups.”
A large part of this gap has to do with the timing of the housing bubble. Many younger Americans bought during inflated times while Wall Street banks were pillaging the entire system. Older Americans purchased homes during a time when Glass-Steagall was still in place and the bulk of loans made in the housing market came from stale fixed rate mortgages. Yet I would also argue that the cost of college today is sapping out a large portion of future earnings. We have seen a diminishing return on investment for college graduates:
A college education is becoming more expensive while the return on investment is falling. A similar trend hit in the housing market. Yet the gap in just one generation has catapulted into a tragic scenario. In 1984 households headed by those 65 and older held a 10 time median net worth advantage on households headed by those 35 and younger. That figure is now up to a stunning 47 today. A gap is always expected as those who are older have time to save and accumulate but the size of the gap is troubling.
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