In today's challenging economic climate, many Millennials feel "frozen out" of the housing market. According to "The Millennial Approach to Estate Planning" study conducted by estate planning company Trust & Will (2024), a significant number of survey respondents expressed that they do not believe that they will ever be able to own a home. Despite real and perceived barriers to homeownership, the desire to build generational wealth still remains strong. This article explores why many are being excluded from homeownership, why building generational wealth remains a core value, and practical tips for starting to build wealth even when you cannot buy property.
Why Millennials Feel Frozen Out of Buying a Home
The financial landscape has shifted dramatically over the past few decades, with the dream of homeownership becoming increasingly elusive for many Millennials. Rising property prices, stagnant wages, and mounting student debt are just a few of the barriers preventing an entire generation from stepping onto the property ladder.
The term "frozen out" has become a common descriptor for Millennials who find themselves unable to break into the housing market despite their best efforts. Understanding the reasons behind these challenges is crucial for addressing the broader issue of wealth inequality and finding alternative ways to build generational wealth.
Here are some key reasons why many Millennials are not able to buy homes:
High Prices and Competitive Markets
Stagnant Wages and Massive Student Debt
Inflation and High Cost of Living
High Property Prices and Competitive Markets
One of the key reasons Millennials feel frozen out of the housing market is the skyrocketing cost of real estate. In many urban areas, home prices have surged far beyond what most young adults can afford, even those with stable incomes. The same goes for rental rates, making it difficult to set aside money for a down payment. This situation is exacerbated by competitive markets where bidding wars are common, pushing prices even higher.
Stagnant Wages and Student Debt
Stagnant wages and significant student debt are other contributing factors. Many Millennials entered the workforce during or after the Great Recession, experiencing years of slow wage growth. At the same time, student loan debt has ballooned, with the average borrower owing tens of thousands of dollars. These financial pressures make saving for a down payment and securing a mortgage incredibly challenging.
High Cost of Living
In addition to high property prices, the overall cost of living has increased. From rent and healthcare to everyday expenses, Millennials are spending more of their income on essentials, leaving less available for saving and investing.
The Importance of Building Generational Wealth
Building generational wealth is a crucial goal for many families, as it provides a financial foundation that can support future generations. Generational wealth goes beyond just accumulating assets; it involves the strategic passing of wealth from one generation to the next, ensuring financial stability and opportunities for children and grandchildren. In the face of economic challenges and market fluctuations, understanding the importance of generational wealth and learning how to create and maintain it is more important than ever.
Here are some examples.
Financial Security
Building generational wealth is about more than just accumulating money; it's about creating financial security for future generations. It ensures that your children and grandchildren have a safety net, access to education, and opportunities to pursue their goals without the burden of financial stress.
Breaking the Cycle of Poverty
Generational wealth can help break the cycle of poverty by providing resources and opportunities that might otherwise be inaccessible. It allows families to invest in education, start businesses, and build a legacy that benefits future generations.
Creating a Legacy
For many, building generational wealth is also about creating a legacy. It's a way to leave a lasting impact, ensuring that your family's values, goals, and achievements continue to be honored and remembered. That's where estate planning comes in; check out our tips a bit later in this guide.
Tips for Building Generational Wealth Without Buying a Home
For those who feel frozen out of the housing market, know that you can still begin to build generational wealth. In America, buying a home is the gold standard when it comes to a symbol of a sound investment. For those who are able to purchase a home, there's a certain sense of achieving the "American dream." However, know that home-buying is not the only investment to help you build wealth. There are plenty of other modalities out there:
Invest in the Stock Market
Investing in the stock market is one of the most accessible ways to build wealth. With the advent of online trading platforms, it's easier than ever to start investing with small amounts of money. Consider setting up a diversified portfolio that includes a mix of stocks, bonds, and index funds to spread risk and increase potential returns.
Start a Retirement Account
Contributing to a retirement account, such as a 401(k) or IRA, is a powerful way to build wealth over time. These accounts offer tax advantages and compound interest, allowing your savings to grow significantly over the years. Many employers also offer matching contributions, which can further boost your retirement savings.
Build an Emergency Fund
An emergency fund is essential for financial security. It provides a cushion to cover unexpected expenses, such as medical bills or car repairs, without derailing your long-term financial goals. Aim to save three to six months' worth of living expenses in a high-yield savings account.
Invest in Education and Skills
Investing in your education and skills can have a significant impact on your earning potential. Whether it's pursuing a degree, obtaining professional certifications, or learning new skills, education is a key driver of financial success and wealth accumulation.
Start a Business or Side Hustle
Entrepreneurship is another avenue for building wealth. Starting a business or side hustle can provide additional income streams and potentially grow into a significant asset. Look for opportunities that align with your skills and interests, and be prepared to invest time and effort to make your venture successful.
Estate Planning
Estate planning is a crucial component of building and protecting generational wealth. It involves creating a comprehensive plan to manage your assets and ensure they are distributed according to your wishes. Key elements of estate planning include:
Creating a Will: A Will outlines how your assets will be distributed after your death and can designate Guardians for your children.
Setting Up a Trust: Trusts can provide greater control over how your assets are managed and distributed. They can also offer tax benefits and protect your assets from creditors. Further, they pass assets to your Beneficiaries outside of the probate process.
Establishing Beneficiary Designations: Ensure that your retirement accounts, life insurance policies, and other financial accounts have up-to-date Beneficiary designations.
Planning for Taxes: Effective estate planning can minimize the tax burden on your Heirs, allowing more of your wealth to be passed onto future generations.
Take Advantage of Employer Benefits
Many employers offer benefits that can help you build wealth, such as stock options, profit-sharing plans, and health savings accounts (HSAs). Be sure to take full advantage of these opportunities to maximize your financial growth.
Focus on Debt Reduction
Reducing and managing debt is a crucial step in building wealth. High-interest debt, such as credit card debt, can significantly impede your financial progress. Prioritize paying off high-interest debt and consider consolidating or refinancing loans to reduce interest rates and lower monthly payments.
You Get to Define Your Legacy
While the dream of homeownership may feel out of reach for many Millennials, it's important to remember that there are numerous other paths to building generational wealth. Investing in the stock market, saving for retirement, building an emergency fund, and engaging in estate planning, are just a few examples of how you can create a solid foundation for financial security and legacy. Generational wealth is not solely defined by owning property; it's about making strategic financial decisions that benefit both you and future generations.
As always, know that Trust & Will is here to support you through your journey. We encourage you to explore how easy and affordable it is to set up your Will and/or Trust through our platform. Once you get your estate planning documents in place, you will feel that much more empowered knowing that you put one of the most important building blocks of your legacy in place.
At Trust & Will, we’re here to help keep things simple. You can create a fully customizable, state-specific estate plan from the comfort of your own home. Take our free quiz to see where you should get started, or compare our different estate planning and settlement options today!
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