Faced with a housing crisis and an exorbitant cost of living, Generation Z is struggling to make ends meet. Yet a study by Bank of America reveals a paradoxical future: thanks to a massive intergenerational transfer of wealth, these young people will become the wealthiest cohort in history, redefining the global economy.
The paradox of Generation Z: between present insecurity and a golden future The picture is often painted in gloomy tones: Generation Z, the young people born approximately between 1997 and 2012, are navigating tumultuous economic waters. Struggling to buy their own home, faced with prohibitive rents and a cost of living that seems to be spiralling out of control, their financial future raises many questions and concerns. Stories abound of over-qualified young people taking insecure jobs or struggling just to cover their living expenses. Yet a major prospective analysis sheds a radically different light on their economic destiny.
The current difficulties faced by Generation Z are very real and well documented. This is in stark contrast to previous generations, particularly the Baby Boomers, many of whom were able to acquire property on much more favourable terms. Today, accessing decent housing or even paying the rent represents a major challenge for a large proportion of these young people. Some analyses, such as those mentioned in various studies, suggest that it would take much more than the minimum wage simply to survive in the current economic climate, illustrating the extent of the financial pressure weighing on their shoulders.
Given this reality, how can we imagine that this same generation could be on its way to becoming the richest in history? The answer lies in an economic dynamic on an unprecedented scale, highlighted by a study from Bank of America, the second most influential banking institution in the United States. Far from being condemned to precariousness, Generation Z is on the cusp of a spectacular economic transformation.
Dizzying figures: the rise of economic power Bank of America’s financial projections are staggering. Despite their current difficulties, members of Generation Z on a global scale have already managed to accumulate a collective wealth of 9,000 billion dollars (or 9 trillion according to the American short scale) in the last two years alone. This figure, already considerable, is just a foretaste of the boom to come.
By 2030, this wealth is expected to leap to 36,000 billion dollars. And the upward trajectory doesn’t stop there: forecasts for 2040 predict a staggering collective wealth of 74,000 billion dollars. These figures testify to the accumulation of capital at a speed and scale rarely seen. This meteoric growth should propel Generation Z to become the richest and most numerous cohort in history around 2035. It would then represent around 30% of the world’s population over the next decade, becoming a demographic and economic force to be reckoned with. While the gradual entry of these young people into the labour market is contributing to this dynamic, with significant growth in their incomes (estimated at +8% last February according to some analyses), the real catalyst for this upheaval lies elsewhere.
The “Great Wealth Transfer”: a historic turning point The main driver of this future opulence has a name: the “Great Wealth Transfer”. This phenomenon refers to the massive transfer of wealth from older generations (mainly Baby Boomers and part of Generation X) to younger generations (Millennials and Generation Z). Between now and 2045, it is estimated that almost 84,000 billion dollars will change hands in the form of inheritances. While a large part of this windfall will go to Millennials and Generation X, a significant portion will go to Generation Z. The Bank of America study suggests that around 38% of Gen Z can expect to receive a share of this colossal inheritance. It is this massive injection of capital that largely explains the dizzying wealth projections for them.
Why are financial institutions like Bank of America so interested in this phenomenon? Because this transition of wealth promises to profoundly reshape the world’s economies. Generation Z, shaped by their current experiences, could adopt radically different consumer behaviours. Accustomed to high prices and having perhaps postponed or renounced certain traditional markers of success (such as buying property early or starting a family), this generation has turned to other forms of spending: experiences, travel, online shopping, personal well-being and small luxuries. Having internalised a certain level of cost of living, the sudden arrival of financial affluence could unleash considerable consumer power in a new direction.
Experts predict that Generation Z will be “one of the most disruptive generations for economies, markets and social systems”. They are expected to redefine what it means to be a consumer. In short, while today they struggle to make ends meet, these young people are poised to become a major economic force with unprecedented transformative potential. The current paradox may just be the calm before the storm of historic economic change.
