By: Meagan Pant
April 12, 2013
For young people today, the American dream of working hard, saving money and becoming richer than their parents may be out of reach, according to a recent study.
Americans in their mid-30s and younger have accumulated less wealth than their parents did at that age more than 25 years ago -- a trend that threatens to weaken the economy overall, according to an Urban Institute study.
Stagnant wages, diminishing job opportunities and lost home values have kept young Americans from saving even as the economy doubled from the early 1980s, the study found.
"Young people are falling behind," said Caroline Ratcliffe, one of the study's authors.
"Across different generations and ages, what we tend to see in this country is that each generation is better off and wealthier. That fact that this group is falling behind is very different," said Ratcliffe, a senior fellow at the Urban Institute.
If young Americans cannot accumulate wealth over their lifetimes, such as people in prior generations, they will be less able to support themselves when they retire, Ratcliffe said. And her study points out that despite the relative youth of those in Gen X and Gen Y -- people born since 1966 -- they may not be able to make up the ground they have lost.
Rebecca Young said she has benefited from her parents' strong savings, and hopes to one day provide the same benefit for her future children.
At age 23, she is working toward a master's degree and stocking what she can in a rainy day fund she has had since high school. But, she said, it can be difficult to save, especially for those young people who take out large student loans.
"People in my generation are of the opinion that it's OK to take out tens of thousands of dollars in student loans," said Young, who graduated in May. "That puts them in debt right away."
With that money in their checking accounts, they do not take into account that they are spending borrowed money, Young added.
Student loan debt has increased in recent years and recently passed $1 trillion (more than credit card debt). Ratcliffe said those large loan burdens can have a ripple effect, delaying young people from being able to build savings or buy a house.
The wealth of those ages 29 to 37 suffered the largest fall, dropping 21 percent compared to people of that age in 1983, according to the study.
Young people's fear about being worse off could have a long-lasting effect on their expectations, Ratcliffe said.
"The idea of moving into the suburbs and having a big home, maybe that changes for this generation," she said.
Ratcliffe said if young people cannot catch up to previous generations, they will be more likely to rely on social programs because they will be less able to support themselves during retirement. She said some of the government programs that support long-term asset building must be redistributed to help poor and young households.
Wittenberg University sophomore Marston Garceau said his parents always encourage him to save, keep his receipts and create a budget for the money he earned working three jobs over the summer. But most students, he said, will spend instead and "go out to eat when they don't need to or buy video games, like me."
"We're living in the here and now and not thinking about the future, where my parents are all about the future -- which I am thankful they are or I wouldn't be here," he said.