U.S. consumer spending has remained surprisingly strong despite inflation, high interest rates and a weaker job market, Fortune reports.
Rather than being driven primarily by the wealthiest households, this strength may be largely explained by generational differences. Baby boomers hold nearly $90 trillion in wealth, representing about 52% of total U.S. household wealth. They also control approximately 54% of household stocks and mutual funds and 41% of household real estate.
Their large holdings allow them to continue spending even when borrowing costs are high. In fact, higher interest rates can benefit boomers because they hold about 60% of household money market funds, allowing them to earn more interest income.
Younger generations face greater financial pressures. High mortgage rates and housing prices have made homeownership more difficult for millennials and Gen Z, while many younger workers remain more dependent on wages and job security.
Meanwhile, many boomers have locked in low mortgage rates or own their homes outright, and their reluctance to sell has limited housing supply and contributed to higher home prices.
Boomers are also helping younger family members financially, including assisting with home down payments. However, their large wealth does not necessarily mean younger generations will inherit all of it. Retirement spending, taxes, debt, charitable donations and other expenses will reduce the amount eventually transferred.
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