Why do young Americans feel trapped financially?

[UNITED STATES] For many millennials and Gen Z, achieving financial security seems elusive — despite seeing their net worth grow on paper.

Recent findings highlight the generational divide. A 2023 Pew Research study reveals that although millennials have amassed a greater share of wealth than Gen X had at the same stage in life, this wealth is concentrated primarily among the top 10% of earners. For most, stagnant wages and soaring costs have eroded the purchasing power that previous generations once took for granted.

“We’re living in two separate economies,” remarked Freddie Smith, an economics content creator, noting the stark financial contrasts between generations. “The middle class, unfortunately, is gone for millennials and Gen Zers. Or, at best, the goalposts have shifted. It’s still possible, but now you need to earn over six figures to maintain a middle-class lifestyle.”

Rachel Schneider, CEO of emergency payment fintech company Canary and co-author of The Financial Diaries, described many Americans as living “at break even.”

This financial vulnerability is worsened by the decline of safety nets. Employer-sponsored pensions have become increasingly rare, and the long-term stability of Social Security remains uncertain. Younger workers are now more reliant on volatile investment markets for retirement planning, transferring more risk to individuals rather than institutions.

“As the year progresses, they may earn enough to cover basic living expenses and bills, but a single setback can throw them off course,” Schneider told. Meanwhile, costs continue to climb. Housing, healthcare, and insurance have all become significantly more expensive. Furthermore, unlike previous generations, today’s Americans are shouldering more responsibility for funding their own retirement.

The housing crisis is a stark example of this pressure. Homeownership rates among adults under 35 have dropped significantly, with the National Association of Realtors reporting that the median down payment for first-time buyers has nearly doubled since the 1990s — even when adjusted for inflation. For many, the dream of homeownership now demands either familial wealth or extraordinary sacrifices.

Despite older generations’ critiques of millennials and Gen Z for perceived lifestyle inflation, many experts argue the issue is more structural than behavioral. “It’s much harder for young people today to save for the traditional markers of the American Dream than it was for earlier generations,” said Joanne Hsu, director of the University of Michigan’s Surveys of Consumers and a research associate professor.

Policy solutions remain fiercely debated. Some economists call for expanded housing subsidies and student debt relief, while others advocate for wage increases linked to productivity. However, partisan gridlock has stalled most large-scale reforms, leaving younger Americans to face these challenges with limited systemic support.

“People often experience shame and distress when their financial lives don’t go as planned,” Schneider said. “However, much of what they’re going through isn’t the result of anything they could have done differently.”

As traditional markers of success become more distant, young Americans are adapting. More are living with their parents for extended periods, sharing childcare responsibilities across households, and seeking new ways to foster community.