Millennials Hold Trillions In Wealth—Yet 'Phantom Wealth' Keeps Them Feeling Poor

Millennials are no longer the lazy bunch. They have actually elevated their standing in society, when it comes to wealth. Surprisingly, there are those who have even exceeded the wealth of the previous generation given the same age that they have right now. However, Millennials who are wealthy don't feel like one -- a scenario called as "phantom wealth."

An analysis of St. Louis Federal Reserve data in 2022 showed that younger families in the U.S. have actually made remarkable gains. The study noted that the median wealth of older millennials was 37% above expectations. On the other hand, those of younger millennials and older Gen Zers was at 39% above expectations.

According to the Federal Reserve data, when taken collectively, millennials are now worth approximately about $15.95 trillion. This number is almost five times more than the $3.94 trillion estimated five years earlier.

Not Feeling Really "Wealthy"

Despite these whopping numbers, there are still only a few millennials who regard themselves as wealthy. This means that their actual net worth on paper does not actually reflect how well off they feel. According to CNBC, this apparent disconnect between the figures written on paper and the perception of millennials as to how rich they are, is called "phantom wealth."

One good example of phantom wealth is the increase in value of a home or a retirement plan. This increase is not felt by the account holder and does not even make an impact on one's daily cash flow.

The strong job market and rising wages have led a lot belonging to the millennials group to purchase homes. They also benefited from increasing home values. Based on the report of St. Louis Fed, home prices increased by 44% between 2019 and 2022.

The real estate gains made by millennials have contributed much into the growth of their wealth. The report noted that the "median wealth of these younger people more than quadrupled" during the abovementioned three-year-period.

The 'Phantom Wealth'

Brett House, an economics professor at Columbia Business School, said that "phantom wealth is a nonsensical term." He said that assets either exist or they do not exist at all. However, he mentioned that there is a "very real phenomenon at work."

The same report found that "millennials experienced a sharp swing in their relative standing."

A report by TransUnion noted that when millennials are compared with other generations, they are very likely to say that their income increased over the last few months. They are also the ones who expect that their potential to earn will be increasing again in the coming year.

Despite rising household wealth, inflation and economic uncertainty have pushed more people to feel insecure about their finances.

"It has become harder for every generation to feel financially secure as more responsibility for managing employment risks, healthcare, retirement pensions, insurance, and overall economic well-being has shifted to individuals—especially in an era of rapidly rising prices," House explained.

Many millennials believe it's more challenging to achieve financial independence today than it was for their parents.

Higher student loan debt, larger mortgages and car payments, and soaring childcare costs have tightened cash flow, said Sophia Bera Daigle, founder and CEO of Gen Y Planning, a financial planning firm focused on millennials told CNBC.

However, experts opine that financial security is often less about how much money you have and more about how less you spend.