Inflation changes expectations of wealth and financial stability

The past two decades have seen multiple recessions, housing busts and periods of intense inflation. These factors have shaped the current cost of living and spending habits of Americans.

The threshold for what is considered “wealthy” and financially comfortable has risen with inflation, keeping pace with rising costs and competing financial obligations.

The average American believes you need a net worth of $2.5 million to be considered wealthy and at least $778,000 to be financially comfortable.

Related: How Ordinary Americans Can Better Plan for 401(k), Retirement Income

Despite the rising cost of living, most Americans are optimistic about their financial future: 60% of adults believe they are in a better position to achieve their financial dreams than previous generations.

Charles Schwab recently released its 2024 Modern Wealth Survey, and the results indicate that the threshold for being financially wealthy and comfortable has risen. However, consumers feel optimistic about reaching these benchmarks.

How each generation perceives wealth and financial stability

The amount needed to be considered wealthy rose from $2.5 million in 2023 to $2.8 million this year, while the rules for what the average American considers financially comfortable vary. In 2023, that threshold was $1 million, while this year’s estimate of $778,000 is more in line with the 2022 figure of $775,000.

The increase in the amount required to achieve “rich” status signals that financial mobility is becoming increasingly difficult.

However, younger generations are more optimistic about reaching different financial thresholds. Gen Z and Millennials consider a net worth of $1.2 million and $2.2 million rich, respectively, while Gen X and Baby Boomers believe you need close to $3 million in assets to be wealthy.

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Millennials are much more in line with their older counterparts when it comes to financial stability. Baby Boomers, Gen Xers and Millennials believe that having between $725,000 and $823,000 is the threshold for financial comfort, while Gen Z believes that having $406,000 is enough to be comfortable.

These different viewpoints are probably attributable to the environment in which each generation came of age. Buying a home was a financial milestone for most baby boomers, but that dream is becoming increasingly out of reach for Gen Z and Millennials.

Gen Xers and Baby Boomers are focusing on another financial milestone: retirement. With one in five Gen Xers not believing they could retire with $1 million in savings, it stands to reason that older generations may factor retirement considerations into their wealth benchmarks.

A couple is seen discussing finances.

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Wealth expectations are influenced by geographic area

Although the cost of living has risen in the US in recent years, it is the highest among major metropolitan areas. The parameters for wealth and financial comfort vary by city, as the cost of living strongly influences disposable income.

Related: The average American faces a major retirement 401(k) dilemma.

San Francisco, Southern California, New York, Washington DC, Denver and Seattle have the highest threshold for what is considered wealthy and financially comfortable. To be considered wealthy in those regions, you would need to have a net worth between $2.8 million and $4.4 million, while being financially comfortable would require between $789,000 and $1.5 million .

The cities with the highest expectations for wealth and financial stability also line up with the cities with the highest costs of living.

However, one of the most important factors that shape the accumulation of wealth is the implementation of a financial plan. 86% of those with a financial plan feel favorably about their savings and investments, compared to 63% and 67% without a financial plan.

Creating a long-term plan to spend, save and invest your money can pay off tenfold in the future and help you reach your financial goals.

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