Millennials Making Less Money Than Their Parents—What to Do About It

Here are some steps to bridge the millennial wealth gap.

Today's American dream promises success to anyone who demonstrates consistent perseverance. Yet for those who live outside the tightly concentrated bubble of wealth in the United States, money is not a guaranteed outcome of hard work. Achieving upward social mobility is becoming less common than ever before. According to data from Opportunity Insights, millennials and Gen Z are no longer making more (or even as much) money as their parents. So what does that mean for the dream of wealth growth?

When you consider stagnating wages, mounting student loan debt, persistent racial and economic oppression, and other factors that make it hard to get ahead—it's not surprising that Gen Z and millennials are poorer than their parents and grandparents. Despite the frustrations this economic divide causes, experts say our actions and mindsets around money can significantly impact our present and future quality of life.

Why Financial Inequality Persists

To address the wealth gap in our own lives, it's important to contextualize economic inequality at large. José A. Quiñonez, CEO of the San Francisco-based nonprofit Mission Asset Fund, has been helping low-income immigrant communities build financial security for the past 15 years. Quiñonez stresses that in the case of the populations served in those years (and in Latinx and BIPOC communities in general), generational wealth differences are often an accumulation of generations of discrimination.

"Whether it's racial, gender-based, or generational, I always remind people that the wealth gap is the last indicator that we use to quantify the extent of economic or social inequalities," Quiñonez explains. Additional intersections, such as substance use, domestic abuse, and mental health challenges, also play a role in preventing upward social mobility.

For Quiñonez, an important part of dismantling this oppression involves honoring the cultural values that many immigrants hold regarding money—even when it's a far departure from the individualistic nature of the American Dream. For example, immigrant communities tend to have a more collective idea of wealth; multiple community members might pool their finances to send a cousin to college or support parents back home.

"You have to consider that people come [to the United States] and work and support themselves here, but they're also supporting a family in another country," Quiñonez adds. "Our approach is not to lecture them with how we do things in this country, but to think: How can we support what they're doing with their money? And do it in a way that is dignified or respectful?"

Mission Asset Fund doesn't directly discuss the wealth gap with individuals they serve, but they're directly closing the divide by expanding access to crucial financial knowledge—like getting a checking account, building credit scores, and improving credit reports—that's traditionally been reserved by wealthier gatekeepers.

Money Mindsets—Then and Now

In addition to socioeconomic oppression, factors like inflation, changing lifestyles, and viewpoints toward money, all make it harder for millennials to achieve the same quality of life as the generations before them, explains Natalie Chaves, CFP.

"It's way more expensive to buy homes now and get approved for loans," Chaves continues. "The cost of living has just gone up tremendously." While it's true that salaries have risen overall over the years, they haven't kept at a consistent rate with inflation, causing wage stagnation. Dwindling pensions and an uncertain social security landscape only fuel the contrast between then and now.

As someone who's helped clients of all ages with personal finance, Chaves notes that the greatest difference between millennials and their grandparents is how they feel about money. "Most of our grandparents and parents grew up in an era where everything was about savings. A lot of these people were scared to get in debt, scared to spend money," Chaves adds.

America's current senior population was raised on the heels of the Great Depression, which resulted in the collective sentiment that money must be saved rather than spent. This aggressive approach was driven by the fear of retiring into poverty and the anxiety of experiencing another economic downturn.

The greatest difference betweeen millennials and their grandparents is how they feel about money.

In contrast, Chaves suggests that much of millennial financial decision-making—whether conscious or subconscious—could be driven by social media and pop culture pressures. "Before, success meant having a house and having kids, and that's just not the way that our world works anymore. It's more about [things like] fashion, travel flexibility—and, yes, houses—but on a grander scale," Chaves explains.

If previous generations saved money out of worry for an uncertain future, today's young adults might spend liberally precisely because they don't know what the future holds. Going big now adds validation to lives in challenging times.

How to Thrive Despite the Wealth Gap

Wealth inequality in America can feel hopeless, terrifying, and frustrating, but reframing how we understand and approach financial success can go a long way in overcoming these challenges. Interestingly, the way that immigrant communities view money—as a shared asset rather than something to be hoarded individually—may be more aligned with the original American Dream than most people realize.

As Yale University economist Robert J. Shiller reported in The New York Times, the earliest mention of "The American Dream" was a moral principle: The ideal that each person could achieve their highest potential and, in turn, be seen for that truest expression of themselves—regardless of their income or assets.

And when James Truslow Adams wrote about the American Dream in The Epic of America in 1931, it had nothing to do with material goods. Rather, as Schiller writes, it was "a forward-looking phrase that implied modesty about current success in giving respect and equal opportunity to all people...a trajectory to a promising future, a model for the United States and for the whole world."

Rather than using our parents' or grandparents' financial histories as a benchmark for our success, thinking of human potential as something that exists collectively—beyond finances and materialism—may be a more productive pursuit. This idea can also help absolve much of the shame and self-blame imposed by the modern interpretation of the American dream, which stresses that poverty and the accumulation of wealth are merely results of personal choices.

What You Can Do to Bridge the Gap

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Set Goals

Four Glass Jars with Money Labeled Retirement, House, Vacation, and College

JGI/Jamie Grill/Getty Images

Once you've embraced the idea that a generational wealth gap in either direction is a result of many complex factors that transcend time and personal agency, you can begin to channel any financial fears into strategic action. Rather than worrying about the financial challenges that could arise in the future, consider how great you'll feel once you have a stronger sense of where your money is coming from and going.

Do you want to plan for retirement? Buy a house? Travel the world? Whether big or small, near-term or long-term, setting savings goals can help you understand what you value. While we'll never be able to control the future, Chaves stresses that savings goals can help strengthen your sense of personal agency, giving you a greater feeling of control over what happens. "Income isn't always something that you can control," Chaves explains. "But what you can control is your spending."

Even when you experience roadblocks along the way, Chaves recommends thinking of your savings account as a personal treasure. "I have experienced so many biases—discrimination, gender gap, payroll gap—all kinds of obstacles," Chaves adds. "Your savings account will never discriminate against you; it'll never judge you."

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Create a Plan

Three piggy banks (two pink, one blue) at a road sign with arrows
Getty Images

Next, Chaves suggests making a plan to bring your goals to life. Personal finance can be intimidating for many people, especially when you're unsure which steps to take. "In a lot of ways, we let fear cripple us, right?" Chaves asks. "We say: 'All right, we're just going to live life right now.' We don't look at the future because it's scary to do that."

Creating a plan for your future goals is an important step in addressing fear-based decision-making, which can result in extreme saving or excessive spending—both of which can be a detriment in their own right.

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Take Action

Stack of coins and pile of money with calendar in background with the 30th day circled in red
Towfiqu Photography / Getty Images

Finally, it's time to take action. If your goal is to save for a house, you might decide to set aside a certain amount of money each month for that savings goal. Set up an automatic withdrawal or create a monthly calendar reminder to make sure you don't miss it. Chaves says to always pay yourself first, meaning investing in your own goals before spending money on anything else.

The most important takeaway from the frustrations of economic inequality? Balance. Remember that saving now is important for supporting your future self, but investing in your community and your present joy is just as important. Leaning too far in either direction can cause an unhealthy relationship with money—and yourself.

Whether we're trying to live up to expectations of exceeding our parents' quality of life or compensating for opportunities our parents didn't have, we all face pressure around how much money we make (and what we do with it).

But there's good news. Chaves believes that taking ownership of your future regardless of your past can take you far: "Knowing your finances will create more freedom in your life than you could ever imagine."

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  1. Goss SC. The future financial status of the social security program. Social Security Administration. 2010;70(3):111-125.

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