article: How much wealth your parents have is likely to matter more than it did for older generations. Here's why. It used to be the case that young adults could expect to start their working lives with higher incomes than those born earlier. This is because incomes normally rise over time, as the economy grows. Then we had the financial crisis of 2008. The upshot is that today's young adults are the first generation since at least World War Two not to start their working lives with higher incomes than those born before them. For example, someone born in the 1980s could expect a household income of £27,000 at the age of 28, compared with £28,000 for those born in the 1970s. The figure was £21,000 for those born in the 1960s and £15,000 for those born in the 1950s. Despite having about the same income, those born in the early 1980s are much less wealthy than those born in the 1970s were at the same age. By their early thirties, the 1980s generation had accumulated wealth of about £27,000 each, on average. By the time they had reached the same age, the 1970s generation had twice as much wealth on average - £53,000 each. A large part of the explanation is that an individual's wealth is mainly made up of property and pensions - and younger adults are faring well with neither. At the age of 30, 40% of people born in the early 1980s were owner-occupiers, down from 55% of those born in the 1970s. Home ownership rates were higher still among earlier generations, with six out of 10 people born in the 50s and 60s owning their own homes at the age of 30. Similarly, the Local Government Association reported in December that just 20% of those aged 25 own their own property, compared with 46% two decades ago. The lower home ownership rate doesn't just explain why young adults have lower wealth now. It also means they are likely to be poorer as they get older, because fewer of them will benefit from future increases in house prices. In their late twenties, renters born in the early 1980s were spending 28% of their income on housing costs. At the same age, those born in the 1960s were spending 22% of their income on rent. Those born in the 1950s spent 13% and those in the 1940s just 10%. Part of the rising costs of renting is explained by the decline of social housing. For today's renters, it seems likely that raising a deposit is a greater barrier to home ownership than actually paying a mortgage. Lower interest rates mean housing costs for young homeowners have fallen and they are quite likely to be paying much less than renters relative to their incomes. Mortgage interest costs for homeowners born in the early 1980s amounted to just 15% of income. Of course, the low interest rates that have benefitted homeowners are themselves likely to be one of the factors pushing up house prices. The vast majority of young adults working in
summary: From unattainable house prices to disappointing pay rises, the financial challenges faced by young adults can seem daunting.