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How different generations accumulate wealth

Net worth at various stages of life

The FRED Blog has discussed how household wealth increases and decreases when the values of financial assets and housing assets go up and down. It’s useful to also consider the concept of net worth, which is the difference between the value of your assets and the value of your liabilities. Our question today is, What impact does age have on the net worth of households?

The FRED graph above uses data from the US Bureau of Labor Statistics’ Consumer Expenditure Survey to track the net change in total assets and liabilities (i.e., net worth!) of six different age groups, from under age 25 to age 65 and over.

The data are plotted in stacked bars to show how changes in net worth differ across these age groups and how business cycles affect every group’s wealth. For example, those aged 25 to 34 (red bars) most frequently report decreases in net worth: At this age, the value of student, consumer, and mortgage loans tends to grow faster than the value of the underlying assets.

The observations in this data set don’t allow us to examine how different generations of these age groups have grappled with wealth accumulation, but recent research does. Victoria Gregory and Kevin Bloodworth at the St. Louis Fed explore how Baby Boomers, Generation Xers, and Millennials have balanced student loan debt and homeownership debt to accumulate wealth. Here’s what they found for the college-educated: Millennials and Generation Xers earn as much as Boomers did, but the larger amount of student loan debt the two younger generations carry can reduce their ability to own a home and, thus, accumulate wealth.

For more about this and other research, visit the website of the Research Division of the Federal Reserve Bank of St. Louis, which offers an array of economic analysis and expertise provided by our staff.

How this graph wase created: Search FRED for and select “Net Change in Total Assets and Liabilities by Age: Under Age 25.” From the “Edit Graph” panel, use the “Add Line” tab to search for and add the other five series. To save yourself some time, simply replace the age group after the colon with: “from Age 25 to 34,” “from Age 35 to 44,” “from Age 45 to 54,” “from Age 55 to 64,” and “Age 65 or over.” Last, use the “Format” tab to change the graph type to “Bar” and the stacking option to “Normal.”

Suggested by Diego Mendez-Carbajo.

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