The 2008 financial crisis hit when Shelley Finke was a senior in college. "I remember completely freaking out to my dad, 'I'm never going to have a job,'" she said. "He had just bought a home that year, and he took a huge hit on it. It scared me to think about a house in that way.
Finke did get a job. And now she's house hunting, because her belief that paying rent is "throwing money out the window" outweighs the traumatic memory of the housing bubble bursting.
Even though she's doing all the right things — moving back in with her dad to save for a down payment, setting her sights on a town house rather than a single-family — Finke has one big strike against her.
Members of her generation, the millennials, and generation X, born just before them, have far less wealth than older folks.
Americans 62 and older were 40% wealthier in 2013 than people that age were in 1989, but the middle-aged and young were about 30% less wealthy, St. Louis Federal Reserve researchers noted in a recent report.
Young people just starting out almost never have as much wealth as those at the end of their careers. But the researchers broke down the numbers another way. In 1989, the median wealth of the old, middle-aged and young was $149,728, $153,759 and $19,830 (in 2013 dollars). In 2013, those figures had jumped for seniors, to $209,590, but fallen for the middle-aged and young, to $106,094 and $14,220.
Wealth matters in ways that earning power — jobs and wages — does not. This generational wealth gap is reshaping the economy. It's also making many younger people feel they have it worse than their parents — a cruel distortion of the American dream.
Finke says she's lucky. Her parents didn't go to college, but managed to help her finance her education. But she and her friends feel worse off than their parents.
"It always seems like we're living paycheck to paycheck, and it's hard to save," she said. "I don't know why it's been more of a struggle for us.
The St. Louis Fed researchers offer a few reasons.
Younger families are "more racially and ethnically diverse than ever before — and we know that race- and ethnicity-based disadvantages continue to loom large in our society," they note.
Generational Wealth Gap
Younger people may also simply suffer by comparison to luckier forebears.
The Silent Generation, those born from 1925 to 1942, "did the best of all because they lived in the golden era of economic growth — after WWII, when the U.S. was unparalleled in the world," said Mark Zandi, chief economist for Moody's Analytics.
Baby boomers, born from 1946 to the early 1960s, haven't done quite as well, Zandi said, because they've always had to compete with so many of their peers.
The boomers were the biggest generation until the millennials came along. Still, boomers "did benefit from a better economy when they were in their prime earning years," Zandi said.
That hasn't been the case for members of generation X, who have double the housing debt that boomers held at the same age, according to a recent Pew study, and many of whom lost big in the housing bust.
Nor is it the case for millennials who, like Finke, graduated from college and started their careers in the worst downturn since the Great Depression. A host of research shows that people who start working during downturns take earnings hits that last decades.
Student Vs. Home Loans
That economic state is one reason millennials have taken on more student debt than any other generation. In many ways, that's been a wise move, Zandi said. Home equity, the traditional middle-class means of financing higher education, evaporated, as did government financial aid.
And more education almost always means better job prospects. In 2014, the unemployment rate for those with only a high school degree was 6%; for those with a bachelor's, it was 3.5%. For those with advanced degrees, it's even lower.
But for some younger folks, getting more education seemed like a better idea than it turned out to be. Rebekah Raze, 30, had only "a tiny bit of debt" after college, when she decided that getting a psychology degree from the online University of Phoenix would be a good step toward a teaching job.
Now, $50,000 later, Raze is working as a Pampered Chef consultant — essentially a freelance gig — and paying $500 a month to what she calls "a waste of money.
Even though she and her husband were able to buy a house they love, she said, "I constantly have a thought in the back of my mind: Is this ever going to go away, or are we always going to have debt? I would love to not have a $200,000-plus mortgage and a $50,000-plus loan, and feel like my money is being thrown into a pit of interest.
While Raze says that intellectually she understands the difference between her student debt and her mortgage, she often emotionally lumps the two together.
Wealth has a more concrete impact on consumer spending and the economy than just sentiment, Zandi said. For every dollar increase in a household's net worth, spending goes up by a nickel. That's "meaningful" for the economy, he said, and the inverse is also true.
Housing Wealth Is Critical
Homeownership may be another casualty of lower wealth. It fell to a 48-year low in Q2, the Census Department said, and some analysts like Zandi think lower wealth will depress ownership.
Some also think the housing crash will scare many younger people away from becoming owners.
Housing wealth — counting a home one owns as an asset — represents two-thirds of all wealth for the median household, according to the Federal Reserve. The U.S. could be facing a vicious cycle in which lower homeownership now means an even lower level in the future, exacerbating the wealth gap.
For the St. Louis Fed researchers, lower wealth means less access to opportunity, possibly exacerbating inequality. "We're not shifting enough resources into helping young people," said William Emmons, one of the researchers, in an interview. "That means they have to shift more of their own, and that benefits people who already have money.
The Pew debt study noted that one-third of gen Xers have a teenager, and most want to help their children pay for college. But one-quarter of gen Xers are still paying off student debt of their own — an average of $20,000 among those who owe, Pew wrote.
Their debt could limit future generations' ability to pay for education, or increase reliance on debt.
Raze says the debt eating away at her wealth has a tangible impact. It means less freedom.
"Not having it would for sure be a huge weight off my shoulders. It would mean I didn't have to work, when what I want to do is be a wife and mom," she said.
When she has kids, Raze says, she wants to help them with college costs. But she deems the most important lesson "knowing what things really cost and having a plan coming out of it (for) how to pay it off."