In today’s challenging economic landscape, young Americans face numerous obstacles in managing their finances, making it harder than ever for them to achieve the financial stability their parents had. Stagnant wages, soaring student loan debt, and a cost of living that’s only increasing create a perfect storm for millennials and Gen Zers.
Amidst these difficulties, inheritances can serve as a lifeline. In fact, a recent survey by USA Today revealed that as many as 68% of millennials and Gen Zers plan to use their inheritance to help make ends meet.
In this article, we use USA Today’s findings to explore the “great wealth transfer” and how it might impact the financial health of up-and-coming generations.
What Young Americans Expect to Inherit
On the whole, millennials and Gen Zers have pretty high expectations for the amount of wealth they stand to inherit, partly because of the housing market—many Baby Boomers have a significant stake in homeownership, something their kids can’t afford, and home values have increased nearly 500% since 1983. Combined with investment growth, higher incomes, and lower debt levels, this results in a hefty chunk of change to pass down to their kids.
The average estimated inheritance for millennials and Gen Zers is about $320,000, with a majority of respondents (84%) expecting amounts greater than $100,000 or $200,000. Shockingly, this amount is less than the cost of an average U.S. home today, which clocks in at around $431,000. It’s an example of a more pervasive problem—that our wealth and the value of a dollar just aren’t worth what they once were.
Still, $320,000 is nothing to sneeze at, and cash isn’t the only asset young Americans expect to get. Among millennials and members of Gen Z, 62% anticipate receiving real estate, while 41% expect to inherit vehicles. Additionally, 32% expect investments and ownership stakes, and 19% say they’ll receive other forms of property.
How Young Americans Plan to Spend Their Wealth
A sudden windfall of cash might sound exciting, but young Americans aren’t using their inheritances to live in the lap of luxury. Instead, the overwhelming majority will use the money to dig themselves out of debt or simply get enough to scrape by.
Of the respondents surveyed, 40% say their inheritance will go toward paying off debt, with the majority (69%) of those with more than $10,000 in debt acknowledging that their new wealth would knock it out entirely. This speaks to just how much debt affects millennials and Gen Zers, mainly in the form of student loans and credit card bills. Additionally, nearly 20% of respondents stated that they would use their inheritance to pay off their mortgage, alleviating another kind of debt.
The majority of respondents (76%) also say they won’t spend their inheritance at all. Instead, they want to use it to create savings, reflecting a desire to build long-term financial security. Most claim their lifestyle won’t change either, so they won’t be out splashing the cash. Of those who do expect lifestyle changes, they’ll come in the form of reduced stress (33%) and some relaxation around how much money they save and earn (48%).
Finally, in contrast to their parents and grandparents, younger generations aren’t reserving much of their wealth for charities. Only 8% of respondents say they’d donate any part of their inheritance, a stark decline from the 72% of Baby Boomers who donate to charity.
Final Thoughts
Today’s economy isn’t what it used to be. Millennials and Gen Zers have had to adapt to living with serious financial difficulties, so their priorities follow suit. For many, inherited wealth means the difference between having a safety net or no savings—or being able to put food on the table vs. struggling paycheck to paycheck.
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As millennials and Gen Zers carefully consider how to use their inheritances, the focus on paying off debt, establishing savings and investments, and addressing immediate needs reflects a real determination to achieve personal financial stability. While the challenges may be daunting, using inherited wealth responsibly provides young Americans with a glimmer of hope, paving the way for a brighter and more secure future.