A metric that many people use to determine their success in life is comparing themselves to their parents.
After all, your parents’ socio-economic status can be quite instrumental in determining your future in life. Doing better than them is a common goal for families from diverse backgrounds.
But these days, few people achieve this goal.
The proportion of people who earn more than their parents has been declining steadily since the 1940s. In fact, only 50% of people born in 1980 grew up to earn more than their parents, compared to 90% of people born in the 1940s. according to an Opportunity Insights study.
So it makes sense that only 36.5% of adults report feeling better financially than their parents, according to CNBC’s Your Money International Financial Security Survey conducted by SurveyMonkey. A larger proportion — 42.8% — say their situation is worse than that of their parents, while the remaining 20.7% say their situation is about the same.
Additionally, many adults in their highest earning years were more likely than their older and younger peers to say they were worse off than their parents, the survey found. Here is the share of each age group who say they feel in a worse financial situation than their parents:
- 18 to 34 years old: 38.2%
- 35 to 65 years old: 49.8%
- 65 years and over: 32.7%
While every family is different, there are a number of reasons why middle-aged adults feel worse off than their parents, generally speaking, as well as a few reasons why things may not be -be not as bad as they seem.
Some things are definitely harder for younger generations
Americans ages 35 to 65 mostly belong to two generations: Generation X (ages 44 to 59) and Millennials (ages 28 to 43). Various factors have made certain financial milestones statistically more difficult to achieve for these groups than for Baby Boomers and the Silent Generation, who would likely be their parents.
Here are three reasons why younger generations are worse off financially than their older counterparts.
1. Wage stagnation
Adjusted for inflation, wages in the United States have barely budged since the 1970s. As prices have risen with inflation, once-high wages have lost much of their purchasing power .
Today’s Millennials and Gen Xers might earn the same salary as their parents at the same age, but their parents’ salaries went much further.
2. Inaccessible property ownership
The steady rise in real estate prices has made it seemingly impossible for many would-be homeowners — especially millennials — to purchase a home. U.S. housing prices are 24 times higher in 2024 than they were in 1963, according to a recent study by Clever.
Owning a home in itself does not make you well off or financially secure. But if your parents owned their home at your age and you can’t afford to buy one, even if you make as much or more money than them, that could contribute to feeling worse about yourself. .
3. High Education Costs and Student Debt
Even though younger generations attended college at higher rates than their parents, they also pay a much higher price. The cost of attending a four-year college has jumped 153% over the past 40 years, according to Bankrate.
As a result, Generation X and millennials hold nearly 87% of the nation’s student debt balance, with Generation X alone holding 57%, according to the Education Data Initiative. Gen X borrowers also have the highest average loan balance at $44,290.
But things aren’t all bad
“People like today’s 30-somethings compare themselves to their 30-year-old parents and feel behind,” Tara Unverzagt, a financial planner and certified therapist, told CNBC Make It. “And to some extent, I’m not sure that’s true.”
Here are three ways younger generations are more successful than their parents.
1. More education
Generation X went to college at a higher rate than previous generations, followed by millennials who became the most educated generation to date. Nearly 40% of millennials have at least a bachelor’s degree, compared to just 25% of baby boomers, according to Pew Research.
More education almost always translates to higher income, which could explain why millennials are on average wealthier at ages 33 and 34 than Generation X and baby boomers at the same age, according to the St. Louis.
2. Better quality of life
Some products and services we use may be more expensive today, but are often better.
Unverzagt takes the example of buying a car. “Compare the cheapest car you could get today with the cheapest car you could get 20 years ago,” she says. “The cheapest car today is much better.”
Technological advances, safety standards and innovation have improved things like communication, transportation, health care and more for the general population, Unverzagt says.
3. More equality
Younger generations have moved through adulthood with more freedoms than many of their parents perhaps had.
Today’s adults are only a generation or two removed from a time when there were fewer legal protections to ensure that people were treated equally when it came to their pay, opportunities housing and their lending capacities.
Gender and racial pay gaps, as well as other barriers to wealth creation, certainly still affect Generation X and millennials. But legislation such as the Equal Pay Act of 1963, Fair Housing Act of 1968 and the Equal Credit Opportunity Act of 1974 helped younger generations avoid some – but not all – of the financial obstacles that their parents and grandparents may have encountered.
Optimism for the next generation
Despite their pessimism about their own situation, 42% of adults believe their children will be in a better financial situation than they are, according to the CNBC survey. This figure drops to 40% among adults aged 35 to 64.
Current parents are even more likely to believe in their children’s future prospects, with 59% of those surveyed with children saying their offspring will be in a better financial situation. Only 1 in 5 parents say they think their children’s situation will be worse.
An inheritance could give these children a head start and help them build on their parents’ financial success. More than 75% of people surveyed say they plan to leave money to their future children in their will.
But leaving that money behind isn’t what matters most. Having their child find secure employment is the most important factor in ensuring better financial outcomes, according to 43% of parents surveyed. Next comes fully funded studies (20%), followed by an inheritance (15%).
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