In that environment, it's not so much parents hoarding wealth, as jealously guarding their children's opportunities. But the result is often much the same.
Precisely.
It's also utterly wild to me that by virtual of tax and retirement policy we're about to unleash a tremendous driver of wealth inequality in middle and upper middle class America - by virtue of inherited 401ks. If you were lucky enough to have family who assiduously invested in their retirement, the odds of you inheriting a massive lump sum is very good. If you weren't, tough.
Within the span of two or three generations, my kids will very likely receive an inheritance of a size that was previous relegated to heirs of vast business empires. All from a succession of modest to modestly high earners who saved and invested. The next generation will have far larger intergenerational economic effects than was ever common before.
One of the under-emphasized components of American meritocracy was that it implied a theory of time: if you do x, y, and z, you will somewhat rapidly move within the social structure.
But what's happened over the past few decades especially is that the time horizon has been progressively lengthened by ever-more extensive training pushing the first real paycheck into the future, student loans making the cost of that training borne over a longer period, and house prices leading people to pay 40% of their income on a mortgage, functionally placing financial freedom at the end of a 30 year payment term. The list could go on, but the meritocratic promise that you'll see social mobility relatively rapidly has mostly been replaced with someday for your typical striving person in the United States.
The widespread and significant inheritances on the horizon (fairly widely reported on under the buzzword The Great Wealth Transfer) threaten to stretch meritocracy's time horizon in new ways, probably beyond what people are willing to tolerate. The promised payoff becomes that if you save diligently your whole life and never spend it, then your kids won't be totally left behind in a bidding war for scarce goods. Will people tolerate a justification of inequality that's fundamentally intergenerational? I doubt it, but I guess the Brits mostly do.
And then there's the FIRE movement / philosophy.
In this paradigm, you get rich by NOT doing the things everyone else is doing - going into credit card debt, driving $50k cars, striving for a McMansion with a high HOA fee, eating from drive-thrus, commuting long distances by car, etc. Instead, you save half your income, live well below "your means", practice health enhancing behaviors and diets, and invest aggressively. The details may vary by generation, but the theme is the same. It's conscious non-conformity with the national religion of consumerism that makes us rich, not necessarily hard work or merit.
Instead of fighting one's whole life to bid up the price of scarce goods, we become the owners of the scarce goods stores.
True, and it has been working for most of us up to now. But what happens when even that isn't enough?
People already scoff at the simplistic "give up lattes and avocado toast, and you'll be rich!" advice clichés. Not because lattes and fancy toast from restaurants aren't frivolous expenses, but because the difference in spending they represent is a drop in the bucket compared to increases in the cost of housing and other necessary expenses these days.
A young person starting out today may do everything right/mustachian and still struggle to get ahead. And unless something cqhanges, it's only going to get worse.
Wages have kept up with inflation. They will be fine. My advice to someone just starting out: buy as small of a house you need, one that needs sweat equity. Then when the housing bubble pops, buy 3 or 4 more. That's what I did when I graduated from college during the great recession.
"Inflation" numbers don't always reflect the true cost of everything, particularly housing, education, healthcare, and energy. Y'know, all the big items that are actually essential, as opposed to all the crap that we buy just to make ourselves comfortable.
This is why I wrote "the details will vary by generation". Home ownership is not the slam-dunk decision it was in 1990 or 2000 when it was far cheaper to own a home than to rent it. That was the era a lot of our financial advice, mantras, and intuitions come from.
Now we're in a strange environment where it often costs less to rent than it does to own. Plus, renting gives young people the flexibility to pursue job opportunities instead of being geographically pinned down, and tends to reduce spending on things like the lawn and garden, remods, and excess junk. Finally, today's high prices force young homeowners to be "house-poor" due to the large amount of capital needed to secure the purchase.
As
one source notes, "After adjusting for inflation, home sales prices increased 102.8% faster than rent prices over a 54-year period."
So, yea. I'd advise a young person or a young family to rent right now instead of buying, if that's the most cost efficient way to live in their particular context. Times are different than in your parents' generation! The rules of success outlined in The Millionaire Next Door (1996) have changed over the past 30 years.
The same could be said for college education. Slowly, over time, jobs not requiring a college degree like truck drivers, electricians, pilots, mechanics, and heavy equipment operators have started to pay as much or more than many jobs requiring a college degree. Furthermore, as the cost of higher education has risen (i.e. government subsidization has decreased), graduates often end up with five and six-figure debts, which can bring their net take-home pay to a lower level than say, a lineman, sheet metal fabricator, soldier, or railroad worker. So depending on what you want to do and your specific talents, college is not the sure-fire path to success it used to be. And if you just dart-throw for a major, you'll likely end up worse off than the UPS delivery person.
Healthcare costs may seem inescapable, but most of these costs are related to the Standard American Diet (SAD), the standard lifestyle of car-reliance, minimal exercise, and hours per day spent being entertained by screens. I'll bundle this into the "Standard Lifestyle". For most people not suffering from a chronic disability or genetic/developmental condition, the choice to live differently will mitigate healthcare costs until they reach old age. As the cost of living the Standard Lifestyle increases, it only makes more and more sense to eat more veggies, walk and bike more, and to stay off the couch. Either behave differently than the crowd, or end up broke and dead.
