A recent survey found that around 60% of Americans think that they can successfully build so-called “generational wealth”, which they will then be able to pass down to future generations in their family. The survey, of around 2,000 adults, found that 63% were confident that they’d be able to accumulate sufficient assets in investments, property, and so on, to be able to pass at least some down to the next generation. Indeed, of this cohort, 74% were already well on the way to this goal.
“Despite changes in the market, homeownership continues to be one of the most surefire ways to build generational wealth in the U.S,” the researchers explain. “Home equity surged to a record $27.8 trillion in Q1, but rising interest rates and costs of living have started to curb demand for home buying.”
Lack of mobility
What is equally clear, however, is that there does not appear to be a great deal of movement between generations, such that people who lack wealth in one generation are likely to pass those meager prospects on to the next. That’s the finding of a recent study from Rutgers University, which looked at generational wealth transfer in the United States between the 1980s and today.
It found that grandparents with the lowest proportions of wealth between 1984 and 1989 were highly likely to have grandchildren in the lowest wealth stratum in 2015-2017. Similarly, those grandparents with the most wealth in the 1980s would have wealthy grandchildren in 2015.
What’s more, there is a strong link between the components of a household’s asset portfolio, ie the combination of risky, safe, and non-financial assets, and the asset components of subsequent generations. For instance, Black individuals tend to have much less invested in risky assets, even after adjusting for any transfer of wealth between generations.
“My decompositions of net wealth into risky, safe, and non-financial assets illuminate different policy pathways to benefit the total net wealth of younger households, including Black households,” the author concludes.
