Households with a major income earner in the baby boom generation held on average almost $1.2 million in net worth in 2019, accounting for about 50 per cent of all wealth in the year prior to the pandemic, says a new report released Friday by Statistics Canada.
“Their share of household wealth remained relatively constant from 2010 to 2019, while the share of wealth for the pre-1946 generation, at about 15 per cent in 2019, decreased as they drew down assets in retirement. Meanwhile, the wealth shares of Generation Xers and millennials, who together account for the remaining 36 per cent of wealth, increased as they have accumulated assets throughout their working lives,” said the federal agency.
“While millennials nearly doubled their average mortgage debt from 2010 ($56,400) to 2019 ($109,300), the value of their real estate assets grew faster. The average debt-to-asset ratio for millennials decreased from 45.6 per cent in 2010 to 39.7 per cent in 2019. Similarly, the debt-to-asset ratio for Generation Xers decreased from 38.3 per cent in 2010 to 23.2 per cent in 2019 as the growth in real estate, pension plans and investment funds outpaced debt.”
While the debt-to-income ratio was highest in 2019 for Generation X relative to all of the other age groups, at 220 per cent, that ratio has decreased by 18 percentage points since 2010, added StatsCan.
“In contrast, millennials have increased their ratio by 21 percentage points, from 178 per cent in 2010 to 199 per cent in 2019. While growing real estate values for millennials have more than compensated for their increased debt holdings since 2010, disposable income has not kept pace, growing at an average rate of five per cent per year compared with six per cent for total debt,” it said.
“Along with higher debt-to-income ratios, Generation Xers and millennials are more susceptible to reductions in disposable income in 2020, as the effects of the COVID-19 pandemic have negatively impacted employment. Younger generations derive most of their disposable income from compensation of employees, mainly through wages and salaries, while older generations receive mainly fixed income payments through pension benefits and old age security. Generation X and millennials accounted for 74 per cent of compensation of employees in 2019, while boomers and the pre-1946 generation accounted for 69 per cent of private pension benefits and transfer payments, mainly from governments.
“Consumption patterns also differ across generations, depending on their needs and preferences. On average, households in Generation X spent the most of any group, at $100,100 in 2019, followed by boomers, millennials, and finally the pre-1946 generation, at $54,300. While Generation X households spend more in most categories, boomers spend more on insurance and financial services, the pre-1946 generation spend more on health, and millennials spend more on education.”
