By Robert Frank—
CNBC
Younger generations grew their wealth much faster than older Americans after the pandemic hit, thanks in large part to stocks, according to a new study.
The total wealth of Americans under 40 increased 80%, to $9.5 trillion, between the first quarter of 2019 and the third quarter of 2023, according to a study by the New York Federal Reserve.
This increase far exceeded that of older generations.
Americans between 40 and 54 saw their wealth increase by only 10% in the same period, and those over 55 saw gains of 30%.
According to the study, stocks were the main driver of the increase in wealth of the younger generations.
Americans under 40
saw the value of their financial assets increase by 50% since 2019
, while those over 55 saw only 20%.
Despite being those who have generated the most wealth in recent years, those under 40 continue to be among the poorest generations.ingwervanille / Getty Images
The study noted that younger generations received more generous stimulus checks during the pandemic and used the funds in part to buy stocks.
For those under 40, corporate stocks and mutual funds accounted for 25% of their financial assets as of the third quarter of 2023, up from 18% in 2019, the fastest growth of any age group.
[Experts explain how to maintain healthy personal finances in the face of high prices]
“The under-40 age group experienced a much larger increase in equity portfolio participation than older age groups,” the study noted.
“This
greater exposure to equities—the fastest-growing financial asset class during the period—
allowed younger adults to record greater growth in both financial assets and overall wealth.
“This shift in portfolio composition toward equities likely reflects the fact that younger adults, being further away from retirement, can afford to invest in risky assets at a higher rate than older adults.”
But despite being the ones who have generated the most wealth in recent years, those under 40 are still among the poorest generations: their total wealth of 9.5 trillion dollars
is a fraction of the wealth of people between 40 and 55 years old.
, which amounts to 29 billion dollars.
For its part, that of those over 55 years of age amounts to 104 billion dollars.
The disparity is largely due to the life cycle of wealth, in which each generation accumulates money as it ages.
A study led by Rob Gruijters, associate professor of education and international development at the University of Cambridge, found that the average millennial had 30% less wealth than the average
baby boomer
at age 35: $48,000 versus $63,100.
However, with the housing market out of reach for many millennials and Gen Z buyers, stocks have become the primary source of wealth.
As the stock market approaches all-time highs, the wealth gap between younger and older generations may continue to narrow.
According to the study, "more rapid growth in wealth among younger adults has led to a limited reduction in age wealth disparities over the past four years."