Are You Wealthier Than Your Parents?

1/1/2022

Most parents hope that their children end up being more successful than they are.  They hope that their children are able to achieve a level of financial security that goes beyond that of which they were able to achieve. Do investors feel they have achieved that? Do wealthy investors feel they are financially better off than their parents were at the same age?

Three-quarters of wealthy investors feel they are better off financially than their parents were at their age, according to recent research on Financial Security and Wellness from Spectrem Group. Nearly a quarter, 22 percent, feel they are in the same financial situation as their parents were at the same age, while only four percent feel they are worse off than their parents were.

Men are more likely to feel they are better off than their parents, with 77 percent of male investors feeling that way, while women are more likely to feel they are the same as their parents, with over a quarter who feel that way. Working investors are even more likely to feel they are the same as their parents, with 29 percent indicating that they feel they are financially the same as their parents at their age. Eighty-three percent of Retired investors feel they are better off than their parents were at the same age.

Investors at different levels of wealth have very different opinions if they are better off financially than their parents are at the same age. Investors at lower levels of wealth are far more likely to feel that they are the same as their parents at their age. Twenty-nine percent of investors with a net worth between $100K-$999K feel they are in the same financial situation as their parents were at the same age, while only 14 percent of those investors with a net worth of $10MM-$25MM feel similarly.

The reason why over half of investors feel they are better off financially than their parents at the same age is because the investors have accumulated more assets than their parents. Nineteen percent feel they are better because they have higher income in their household than their parents did, while 10 percent feel they are better off because they are more knowledgeable about investments than their parents were.

For the small percentage of investors who feel they are worse off the reasons are few, with 39 percent feeling they are worse off because they have accumulated less assets than their parents had at that same time in their lives. Nearly a quarter of the investors who feel they are worse off indicate they feel that way because they have lower income than their parents did.

The desire for children to do better is almost as strong as a child’s desire to achieve more than their parents. This desire can help investors work hard to achieve wealth that exceeds that of their parents, however it is important to factor this in through the context of all the components of their financial lives. The financial situation may not look the same because there could be a difference in the number of children, or location and associated cost of living adjustments. Investors may also have very different goals for what they want their retirement to look like from their parents, so while comparing to one’s parents is common, it may not always be helpful.