A 20-year US study found that 70 per cent of wealthy families lost their wealth by the second generation, and 90 per cent by the third

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Baby boomers were undoubtedly a fortunate generation. After World War II, they had the opportunity to build significant wealth, benefiting from rapidly growing economies that boosted earnings, real estate, and stock markets. Meanwhile, younger generations today face slower productivity growth and several economic setbacks, from the 2008 financial crisis to the Covid-19 pandemic. Many young adults struggle to afford homes, compounded by concerns over climate change and geopolitical instability.

However, the prosperity—and hard work—of parents and grandparents means millennials and Gen Z have one silver lining: the prospect of a substantial inheritance. Over the next 25 years, more than $100 trillion in assets, including property, fine wines, and artwork, will pass from boomers and older generations to heirs in the U.S. alone, according to wealth manager Cerulli Associates. Globally, Vanguard estimates that $18 trillion will transfer by 2030, marking the largest intergenerational wealth shift in history.

What are the implications for economies, markets, and societies? Not everyone will benefit equally. In the U.S., the wealthiest 10% of households will transfer the majority of the assets. In the UK, research from the Resolution Foundation reveals that affluent boomers are more than twice as likely to gift wealth to their children compared to less wealthy peers. This suggests that intergenerational inequality could deepen, especially if economic growth remains sluggish.

The economic impact also hinges on how the wealth is used. Much of it may go toward paying off debts, covering grandchildren’s education, or funding early retirements in warmer locales. While this could alleviate financial pressures for some millennials and boost certain economies, it might not lead to a widespread spending boom. Governments, facing budget constraints, are likely to scrutinize inheritance taxes more closely.

In terms of investment, millennials and Gen Z differ from their predecessors. They are less inclined to favor traditional assets like stocks and bonds. A Bank of America survey found younger generations allocate three times more of their portfolios to alternative investments—such as private equity, startups, and cryptocurrencies—compared to boomers and Gen X. They are also drawn to socially and environmentally conscious investments. While this approach could add volatility to portfolios, it might benefit global causes and extend the reach of finance.

Yet, inheritances can also be squandered. A U.S. study spanning two decades found 70% of wealthy families lost their wealth by the second generation, and 90% by the third. Family disputes, lawsuits, or reckless spending on speculative ventures could erode inherited wealth. Effective succession planning and financial literacy will be crucial. In Britain, only 40% of young adults were financially literate, according to a 2023 survey. Older generations may also become more deliberate in dictating how their wealth is used.