Why Are Millennials Net Worth Negative?

Millennials are technically anyone born between 1980 and 1998 (this of course, can change). Basically, these are the people between the ages of 18 and 35 today. When it comes to money, millennials do have some of the highest student loan debt rates of any generation in history. The average millennial has about $30,000 in student loans.

Depending on when the millennial graduated college, they could have entered a terrible job market, or on the other hand, a decent job market. Don’t forget, some millennials graduated form college before the financial crisis of 2007 and 2008, some during it, and some after it. When a millennial graduates from college plays a huge role in their earnings right out of school.

Keep in mind when looking at these numbers that most millennials are dealing with major life events as well. This can range from buying a car, to buying a house, and to starting a family. Some millennials made these life events before the recession, some during, and some after.

As a result, it is extremely difficult to define millennials financially as there are a lot of factors that come into play. We focus on net worth which we calculate as assets minus debt. For assets we take into account the average starting salary after graduating with a bachelor’s degree, and the average annual savings rate per year. For the debt we take a look at the national average student loan debt per year.

The NACE survey does a great job looking at the average starting salary of college graduates with a bachelor’s degree each year.

    Age

Average Starting Salary (CPI Adjusted)

35 (Class of 2003) $50,444
34 (Class of 2004) $50,078
33 (Class of 2005) $50,087
32 (Class of 2006) $50,731
31 (Class of 2007) $52,046
30 (Class of 2008) $53,142
29 (Class of 2009) $53,451
28 (Class of 2010) $52,353
27 (Class of 2011) $53,166
26 (Class of 2012) $45,102
25 (Class of 2013) $45,739
24 (Class of 2014) $47,823
23 (Class of 2015) $50,219

 

We have to make some assumptions about saving. Again, net worth is all about assets minus debt. Income plays a huge role, and how much income is saved and how much debt is payed off really makes a difference. For the “average” millennial, I’m going to look at average savings rates for the calculation. For the average millennial, we’re going to factor in IRA and 401k savings, as well as home equity.

     Year

Average Annual Savings Rate

2003 4.8%
2004 4.6%
2005 2.6%
2006 3.3%
2007 3.0%
2008 4.9%
2009 6.1%
2010 5.6%
2011 6.0%
2012 7.6%
2013 4.8%
2014 4.8%
2015 5.1%

 

The WSJ article “Student Debt Is About to Set Another Record, But the Picture Isn’t All Bad” lists the national average student loan debt per year.

           Age

     Average Student Loan Debt

35 (Class of 2003) $18,271
34 (Class of 2004)

    $18,608

33 (Class of 2005) $19,669
32 (Class of 2006) $20,790
31 (Class of 2007) $21,975
30 (Class of 2008) $23,228
29 (Class of 2009) $24,664
28 (Class of 2010) $26,125
27 (Class of 2011)

    $27,707

26 (Class of 2012) $29,384
25 (Class of 2013) $31,163
24 (Class of 2014) $33,050
23 (Class of 2015) $35,050
22 (Class of 2016) $37,172

 

I want to emphasize that these are just my estimates. The Federal Reserve data lumps everyone under 35 into one bucket, so while we have some starting points, things can always skew one way or another.

However, I think it’s a great starting point for discussion, so let’s jump into it.

Age

Average Millennial Net Worth

35 (Class of 2003) $20,236
34 (Class of 2004)

    $17,351

33 (Class of 2005) $13,599
32 (Class of 2006)  $9,896
31 (Class of 2007)  $6,036
30 (Class of 2008)  $2,093
29 (Class of 2009) -$1,989
28 (Class of 2010) -$6,043
27 (Class of 2011)

    -$10,168

26 (Class of 2012) -$14,447
25 (Class of 2013) -$18,988
24 (Class of 2014) -$23,704
23 (Class of 2015) -$28,706
22 (Class of 2016) -$33,984
21 -$38,915
20 -$27,129
19 -$18,086
18 -$8,893

 

I tried to create these estimates to line up with the real data as best as possible, but most real data points exclude negative net worth for millennials buried in student loan debt. For reference, the median of millennial net worth is $10,400. The true geometric average of millennial net worth is actually $75,500, but that number is heavily skewed by outliers such as Mark Zuckerberg.

So, what that means is, if you want to be “better” than average, the 50% mark is $10,500 overall. Here you can see my best estimate of the 50% mark by age. What are your thoughts? Comment below!

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