The fundamental economics for the Next Generation are dramatically different than what was true at the same age for Mom and Dad and/or Grandma and Grandpa. For the past 50-100 years, a homeowner could find a reasonable place to raise a family for ~3x their wage. It was a sacrifice to make it happen, but so many did, as it was core to the American Dream.
These days, between prevailing wages, interest rates, housing supply, families locked into and/or not wanting to leave their current homes, and so many other factors, it’s no longer a time where ~3x wages secures a home, it’s more like 5x-10x-15x or more. The purpose of this post is not to debate what the ratio is, because that answer does not change the real answer: what to do about it?
How much help does the Next Generation need? That will of course be an individual family decision based on ability, promise, and planning, but generally speaking, the Next Generation needs both broad policy and individual help. I will leave the broad policy questions to those who are paid to opine (and we would be well served to remember that we, the citizens, are the customers of our government, and we expect to get what we pay for).
Our friends at Morning Brew noted that Empty Nests Are Filling Back Up. “Young adults are increasingly moving back in with their parents, in part to sidestep the high cost of living on their own. According to the Wall Street Journal, citing Federal Reserve data from last year, 49% of adults under age 30 say they live with a parent. That’s up 12 percentage points from 2019. And it’s not just recent college grads: Nearly one-third of adults age 25+ live with a parent.”
These are not lazy or unlaunched Next Generation, as “more than one-third say their primary motivation for moving home was so they could save for a down payment on their own home, per Thrivent.” But what if families could help the Next Generation access a portion of their future inheritance today, tax free, without impacting Mom and Dad’s or Grandma and Grandpa’s quality of life?
As much as we lean into the rugged individualism of the American Dream, everyone needs help sometimes. We can all use a hand from family, friends, and neighbors. And I think this element of the American Dream deserves to be highlighted, too: we can continue a tradition of walking each other home, of helping, and of kindness while we all strive to give the Next Generation a better life than was given to us. We can help our families and we can help each other move forward…