A new study shows the vast majority of Gen-Z says they’ll be wealthy one day. But what does “being wealthy” really mean?
Ask a U.S. adult if they’ll ever be rich, and you get some conflicting responses, depending on the age demographic.
A case in point.
A new study by Magnify Money, shows that 44% Americans believe they’ll be wealthy one day. Yet that number jumps with Generation Z (basically, America’s youngest adult demographic, born between 1997 and 2012) with 72% of this population believe they’ll hit the wealth jackpot one day, making them the most financially optimistic generation.
As Magnify Money points out, older consumers are more pessimistic. Only 36% of Gen Xers (ages 42 to 56) and 19% of baby boomers (ages 57 to 76) believe they’ll be wealthy one day. Gender-wise, men (55%) are also more inclined to believe they’ll be richer than women (34%).
There’s more. While the future’s looks bright to younger Americans, U.S. adults as a rule have a long way to go to reach genuine wealth.
“Despite the percentage of Americans who believe they’ll be rich one day, 88% say they aren’t wealthy right now,” the study noted. “Still, the most financially optimistic groups are also the most likely to believe they’re already rich: Gen Zers (18%) and men (16%) are more likely to already consider themselves wealthy, compared with Gen Xers (9%) and women (9%).”
Unsurprisingly, the covid-19 pandemic has impacted how Americans view their financial situations, in a decidedly downbeat way.
More than half (51%) of Americans in 2019 said they’d be rich one day — seven percentage points higher than today. “Millennials (ages 26 to 41), once the most financially optimistic generation, saw their expectations drop the most: 66% thought they’d be rich in 2019, but just 59% do now,” the study concluded.
What Does ‘Wealthy’ Mean Today?
While “wealthy” is a subjective term, most consumers agree it comes down to the ability to live comfortably without concern for finances. For example, in the Magnify Money study, just 23% think wealthiness means being a millionaire.
Additionally, 30% of study respondents say that debt should be restricted to mortgages and 27% say home ownerships is the best wealth-building strategy.
Past that, defining wealth becomes more difficult.
Technically, there’s a decent case to be made that the development of valuable economic resources is the foundational aspect of real wealth.
“These resources may be measured either in terms of the items themselves or in terms of their monetary value, which is the definition of wealth,” said Johnathon Merry, founder at Moneytransfers.com.
The most common way to measure wealth is by a person’s “net worth,” Merry noted.
“One’s net worth can be calculated by first figuring out the total market value of all of a person’s tangible and intangible assets, then subtracting the total amount owed on all of those assets,” he said.
Other financial experts have their own definition.
“Typically, wealth includes a person’s or a family material possessions as well as the companies that are being built by such individuals,” said Alina Trigub, strategic real estate advisor at Real Estate Bees, in New York, N.Y. “Yet nowadays, especially considering an increasingly high inflation, being millionaire may not automatically qualify you for being wealthy and vice versa. You need to own a lot more, ideally investments that promise to multiply in value significantly down the road”
One thing’s for sure, the biggest component to real wealth creation is having money work for you while you’re asleep.
“In other words, whatever you make while you’re not asleep needs to be passively invested in assets that would work for you on its own (without your direct involvement),” Trigub said. “That way, your wealth is retained and multiplied in a tax efficient way.”
