Finance Weekly News Update May 26, 2018 – June 1, 2018

Millennials Born in 1980s May Never Recover From the Great Recession

Luhby, Tami

Posted 5/23/2018

Key words and Definitions

Net worth – the value of your assets minus the value of your liabilities.

The Great Recession – a sharp decline in economic activity lasting from December 2007 to June 2009.

Financial Plan – a comprehensive plan detailing your current financial condition, your financial goals, and the steps necessary to achieve those goals.

Summary: Key Points in the Article.

A report released by the Federal Reserve shows that families headed by someone born in the 1980s have a lower net worth due to the Great Recession. This age group also lost ground during the 2010 to 2016 period following the recession. Other age groups accumulated wealth but at a slower pace than previous times. The study shows that the wealth gap between the young and the old widened after the Great Recession.

Most 1980s born individuals were too young to own homes but were also heavily indebted. The non-mortgage debt did not benefit this group through appreciating home values which in turn resulted in declining net worth. According to the study, this age group suffered huge wealth setbacks during typical peak earning years. The question remains as to whether they will be able to recover and achieve the same level of wealth as previous generations.

Thinking Critically Questions

1. What factors caused the households led by someone born in the 1980s to have a lower net worth?

2. How will this lower net worth affect these households?

3. What steps can you take to improve your net worth?

Multiple Choice Questions

1. A person’s net worth is the;
a. value of their assets minus their liabilities
b. their debt plus the value of their assets
c. the sum of both short-term and long-term debt
d. none of these

2. A person’s net worth will increase if;
a. their assets increase in value
b. their liabilities increase in value
c. they pay down debt with cash
d. none of these

3. When computing net worth, assets should be listed at;
a. book value
b. historical cost
c. market value
d. none of these