Do millennials have a raw deal compared to Gen-Xers when it comes to finances?
Statistics Canada set out to settle the debate once and for all and it turns out young people don’t have it so bad after all.
Millennials are the most educated generation, and as a result, have higher household incomes than Gen-Xers and baby boomers when they were the same age.
Household incomes hit $65,000 a year for millennials aged 25-34 in 2016. Gen-Xers of the same age made $51,000 in 1999. Statistics Canada’s numbers were adjusted for inflation.
The study found millennials are wealthier because of rising real estate prices, especially if they put money to work in Toronto or Vancouver.
Total household assets minus total debt, or median net worth, for millennials is $70,600. That’s over one and half times Gen-Xers’ median net worth of $42,800.
Because much of that wealth has been built through owning real estate, millennials carry much more debt, mostly in the form of mortgages.
The debt-to-income (after tax) ratio for millennials is 216 per cent, which far exceeds 125 per cent for Gen-Xers and 80 per cent for young boomers.
Mortgage debt on its own is more than 2.5 times the value of after-tax incomes for millennials.
The study found rising home prices haven’t scared millennials away from jumping into the market.
An age between 30-34 is a typical time for people to enter the housing market. Of this group, 51 per cent of millennials buy homes, which is the same as Gen-Xers but less than baby boomers at 55 per cent.
This group of millennials’ median wealth is $261,900 compared to $18,400 for those who didn’t buy a home.
Clearly, a rising tide does not lift all boats because the wealth gap among millennials is wider than Gen-Xers.
The net worth for millennials in the bottom 25 per cent is $9,500 compared to $253,900 for those in the top 25 per cent. For Gen-Xers, it’s $6,200 and $126,900.
Among millennials with a university eduction, median wealth is $116,000 compared to $34,100 for those with a high school degree.
Millennials in the top 10 per cent hold 55 per cent of the total wealth for their generation.
The study defines millennials as those aged 25 to 34 in 2016 (those born from 1982 to 1991). Young Gen-Xers are aged 25 to 34 in 1999 (those born from 1965 to 1971). Young boomers are 25 to 34 in 1984 (those born from 1950 to 1961).
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains