Here’s the No. 1 Factor Contributing to Millennials’ Wealth

Millennials’ total net worth has doubled over the past two years, a MagnifyMoney study found. In the first quarter of 2020, millennials had a collective net worth of $4.55 trillion. That figure jumped to $9.38 trillion during the first quarter of 2022 — a 106% increase. In addition, the average millennial’s individual net worth increased from $62,758 to $127,793.

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As for what’s making up the net worth of this generation, the majority — 36% — comes from real estate. Other contributors to millennials’ net worth include pension entitlements (20%); consumer durables, such as cars, furniture and other household goods (10%); and private businesses (10%).

Here’s a closer look at what’s contributing to millennials’ wealth and the best ways for this generation to increase their net worth.

Why Real Estate Is a Good Investment for Millennials

“Home equity is the largest investment for many families, and this appears to be true for millennials as well,” said Paul Peeler, financial advisor at Integrated Financial Group (IFG). “This can be a reliable driver of long-term family wealth for a couple of reasons: 1) The homeowner can leverage the growth of a real estate asset with borrowed funds, and 2) the mortgage payment acts as kind of a monthly forced savings plan. Since a family will always need housing, it is also a hedge against future housing costs.”

It can be an especially wise investment in today’s environment.

“I think millennials are justified in having 36% of their net worth in real estate, particularly considering how much real estate prices have increased in the last few years,” said Andrew Latham, CFP and managing editor at Supermoney.com. “Owning your home makes sense in many markets.”

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Real Estate Isn’t the Only Way for This Generation To Build Wealth

Although the majority of millennials’ net worth is held in real estate, there are other paths to wealth.

“Building wealth is like dieting,” Latham said. “There isn’t one right way of doing it, and what works for you may not work for everyone.”

Robert Johnson, professor of finance at the Heider College of Business at Creighton University, recommends investing in a low-fee, diversified equity index fund.

“Continue to invest consistently whether the market is up, down or sideways,” he said. “Dollar-cost averaging into an index mutual fund or ETF is a terrific lifelong strategy.”

For those who are entrepreneurial, starting your own business is another available pathway to a boosted net worth.

“I like that millennials own business interests,” Peeler said. “If you are wired to be a business owner, that route is hands down the best way to build personal wealth.”

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This article originally appeared on GOBankingRates.com: Here’s the No. 1 Factor Contributing to Millennials’ Wealth

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