Many millennials may be in good financial hands in the next 20 years, according to a new report claiming the generation is set to become the richest in history.
However, this wealth won’t magically appear in millennials’ bank accounts because they stopped spending money on oat milk lattes and avocado toast: it’ll be thanks to assets passed down to them from their elders.
Knight Frank, a global real estate consultancy group, recently released the 18th edition of its Wealth Report. One of the biggest takeaways from the 76-page document is that millennials (those born between 1981 and 2000) will receive a “seismic” transfer of wealth in the coming years.
“Over the next 20 years, a transfer of wealth and assets will occur as the silent generation and baby boomers hand over the reins to younger generations,” reads the report.
Wealth transfer to millennials comes with a catch
In a follow-up analysis, Liam Bailey — global head of Knight Frank’s Research Department — highlighted that this wealth shift will see “US$90 trillion of assets move between generations in the US alone.”
However, not all millennials will get a piece of the metaphorical money pie, as Bailey emphasized that those already “affluent” will be part of the “richest generation in history.”
There is also a huge catch to this massive wealth transfer, as it will worsen wealth inequality worldwide.
“There is a huge dichotomy at play: 71% of the world lives in a country where inequality is growing,” stated the report.
A recent report from Oxfam highlighted the environmental impacts of wealth inequality. It found that the richest 1% are responsible for the same amount of carbon pollution as the five billion people who make up the poorest 66% in the world.
Knight Frank added that this imbalance will only add to the next generation’s responsibility to “counter inequality with impact investing or fighting climate change.”
Younger generations will invest differently
The way millennials invest will also be quite different than the generations before them, added Bailey.
Many are paying attention to climate change and its impacts on the world, and this is “one example through which capital will be redirected,” he said.
While already affluent millennials seem to be in good hands when it comes to their financial futures, the report notes that affluent Gen Zs are the most confident in their ability to create wealth, according to results from a survey conducted by Knight Frank.
The survey results found that 75% of Gen Z respondents expected their wealth to increase in the next year.
“Gen Z, in particular, are looking for ways to invest in alignment with their values. It’s
not just about financial returns; it’s about building cultural capital,” stated Mike Pickett, director of Caznove Capital, in the report.
Unlike their parents or grandparents, Pickett believes younger generations will not see purchasing residential property as a path to wealth creation.
“In particular, the low interest rate environment and impressive growth in house prices
of the past 15 years are unlikely to be repeated in the next 15 [years],” Pickett added.
Gen Z could be more interested in adopting a “subscription-led” lifestyle, said Pickett, prompting them to rent property or lease assets such as cars.