Millennials’ collective net worth has skyrocketed in recent years. According to Federal Reserve data, the generation now holds about $15.95 trillion in wealth, a big leap from just $3.94 trillion five years ago.
By many measures, millennials are doing great — but they don’t seem to feel that way. This disconnect between being wealthy on paper and feeling financially free has been referred to as “phantom wealth," and it could be due to the following factors.
Wealth that’s locked away
While the data shows that millennials have experienced a pretty massive growth in net worth, much of this increase comes from two main sources: rising home values and stock market gains. These are not cash in hand. So millennials might technically be wealthier, but that doesn’t mean they have more disposable income.
“Both of these assets aren't really liquid, which means millennials don’t have instantaneous access to either of them,” said Kevin Leibowitz, president and CEO of Grayton Mortgage. With this wealth locked away, millennials can’t spend it unless they sell, and even then they’d have to buy in the same inflated market.
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A deep-rooted sense of insecurity
Every generation is shaped by defining events in their formative years that influence how they see the world — and how they see money. Bobby Mascia, CEO and founder of Green Ridge Wealth Planning, believes that 9/11, which occurred during millennials’ formative years, is one of the first major disruptions that instilled a sense of uncertainty.
Then came the Great Recession in the late 2000s. “Unlike previous generations who may have experienced financial hardships more distantly, millennials were deeply affected because they had a front-row seat to the economic turmoil,” Mascia said. During this time, millennials saw their parents struggle with job losses and home foreclosures. The constant news coverage reinforced the fragility of financial security and the banking system.
“Fast forward to the post-COVID era. Millennials have endured not just one economic disruption, but multiple,” Mascia added. “They’ve faced recessions, skyrocketing housing prices, overwhelming student debt and job instability. These compounding factors have made financial security feel like an ever-moving target.”
As a result, millennials have developed a deep-rooted sense of insecurity about money and the world at large. And even once they achieve financial success, they seem to have an underlying fear that stability could disappear at any moment. The world has repeatedly pulled the rug out from under them, so many are struggling with financial insecurity regardless of their actual net worth.
Social media comparison
According to a Credit Karma survey, around 33% of Americans experience a distorted view of their financial situation. Younger generations, including millennials, struggle with it the most. And despite having above-average savings, 41% of millennials feel behind financially.
The culprit for this could be social comparison. Many millennials have grown up using social media and are constantly bombarded by their peers’ curated highlight reels. This endless comparison breeds financial anxiety and a sense of inadequacy, even among those who are actually doing well financially.
The rising cost of living
The illiquidity of their assets, coupled with the rising cost of living — due in part to inflation and high interest rates — is another reason millennials feel less wealthy than they appear on paper. According to a Bank of America survey in May 2024, 76% of workers say the cost of living is outpacing growth in their wages, compared to 67% in June 2023.
"Even if millennials' retirement accounts have increased, the day-to-day cost of living has also gone up, which may still make them feel like they’re just getting by"
“So, even if millennials' retirement accounts have increased, the day-to-day cost of living has also gone up, which may still make them feel like they’re just getting by,” said Jordan Mangaliman, wealth preservation specialist and CEO at Goldline Financial Services.
How to achieve real financial security?
If you’re still constantly stressed about your finances and suffer from money dysmorphia despite a growing net worth, try these steps to develop a genuine sense of financial security.
Build liquid savings. If most of your net worth is tied up in retirement savings and real estate, consider putting a portion of your wealth in more liquid assets like a high-yield savings account. This way, you can easily access it for short-term needs or emergencies.
Avoid lifestyle inflation. If your spending increases just as fast as your income, you may never feel financially secure, no matter how much money you make. If you haven’t already, create a budget to keep your expenses under control and maintain a gap between what you earn and what you spend.
Work on your money mindset. Jay Zigmont, founder and CEO of Childfree Wealth, believes that feeling financially secure comes from shifting your money mindset more than hitting an artificial goal like becoming a millionaire. “Many millennials saw their parents struggle with their finances. These tough times can create trauma around money,” he explained. “Until this trauma is addressed, they may not ever feel real financial freedom.”
Zigmont suggests working with a financial professional for at least six months to help shift this limiting mindset. “And though your finances may not change drastically in those six months, your comfort level will, and that is what matters,” he said.
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