ST. LOUIS (7/29/15)--Credit unions have yet another reason to help younger families in building wealth. A new report indicates that young families are better educated and more diverse than previous generations, but unless they pick up some of their elders’ savings and spending habits, they are not on track to acquire more wealth.
The findings, based on a study of data between 1989 and 2013 by the Federal Reserve Bank of St. Louis, indicate a widening wealth gap between the typical old family (with heads of household age 62 or older), middle-age (ages 40-61) and young (younger than 40) families.
At America’s Credit Union Conference and the World Credit Union Conference earlier this month in Denver, credit unions were told they can assist younger families in building wealth by acting as financial advisers to younger generations (News Now July 15).
The St. Louis Fed looked at the data and age in two ways: where a person stands in the life cycle (young, middle-age or old) and how birth-year cohorts compare. It found young and middle-aged families today have accumulated less wealth than their counterparts of a quarter-century ago. Old families hold more wealth than their counterparts a quarter-century ago.
Young families’ median wealth dropped more than 28% during the period--to $14,000 from $20,000. Middle-age families’ median wealth decreased 31%, to $106,000 from $154,000. Old families’ median wealth rose 40% to $210,000 from $150,000. The earnings are adjusted for inflation.
Lack of education isn’t to blame. More likely younger families could be losing ground because they are more racially and ethnically diverse group than previous generations, with lower earnings, said the report.
Young families could accumulate wealth faster if they manage their balance sheets more like older generations by setting up and maintaining an emergency fund, building a diversified portfolio of assets, keeping debt to a minimum, saving regularly and paying bills on time, said the St. Louis Fed. They also could delay the debt burden of home ownership.