Although the COVID-19 pandemic had devastating effects on the U.S. economy, one key demographic was able to benefit during that time: Millennials.
Millennials, who are defined by the Federal Reserve as people born between 1981 and 1996 (meaning roughly those between the ages of 26 and 41 in 2022), saw their total net worth double since the first quarter of 2020, when it was at $4.55 trillion, according to a recent report by MagnifyMoney.
That number has since surged 106.2% to $9.38 trillion during the first quarter of 2022.
Meanwhile, millennials' average net worth doubled as well. In the first quarter of 2022, millennials held an average of $127,793 versus $62,578 in the first quarter of 2020 — a whopping 103.2% jump.
"There's not one specific reason for the substantial increase in millennials," MagnifyMoney Executive Editor Ismat Mangla told Yahoo Finance. "It was a perfect storm of factors that has led to to the significant increase in total net worth."
These factors include taking advantage of the housing market, the student loan payment pause, and even "side hustles."
Real estate, side gigs
A majority of millennial net worth is held in real estate, according to the report, while 20.2% is held in pension entitlements and 10.3% each in consumer durables and private businesses.
“Historically low mortgage rates allowed millennials to affordably finance their homes, in turn giving them a big leg up eventually when the real estate market took off and housing prices skyrocketed,” Mangla said. “A lot of millennials got in at the right time.”
Real estate is also where most millennial debt is found — 62.6% is tied up in home mortgages.
According to a 2022 report by the National Association of Realtors, millennials now make up the largest share of home buyers at 43%, and that number is expected to keep growing.
“Those in the housing market at the start of the pandemic, they have debt, but it's manageable," Mangla said. "And those who didn't were left out."
This debt was made worse by the pandemic. With COVID came massive layoffs for thousands of Americans, forcing many to learn new ways to generate income. This is commonly referred to as a "side hustle" and may include activities like investing, reselling products online, social media marketing gigs, and more.
A 2020 survey from LendingTree found that 50% of millennials had a side hustle during the first year of COVID. These side hustles, coupled with elevated unemployment benefits and stimulus checks, helped many millennials stay afloat financially.
Student loans 'an important driver'
Student loans are another key aspect of net worth, especially for millennials. Since March 2020, all federal student loans have been in forbearance, meaning no payments have been required and no interest has accrued during that time.
Because of the student loan payment pause, millennials were able to put their cash towards other areas that helped build wealth.
“Student loan forgiveness was an important driver in millennials growing their total net worth," Mangla said. "A majority of the generation has some kind of debt from student loans.”
According to the Education Data Initiative, millennials hold an average balance of $38,877 in student loan debt.
That "lack of transparency from the Biden administration on student loan forgiveness and when that will be ending" is another concern for Mangla.
It's unclear how much student loan debt the Biden administration is planning on forgiving — if any at all — at least until Aug. 31 when the latest payment pause expires.
Although millennials have made the most gains in terms of net worth since the onset of the COVID pandemic, they still account for just 6.6% of America's wealth.
Baby Boomers have the most at $71.08 trillion, which is 50.4% overall, while Gen X owns 29.9% at $42.16 trillion.
"It's good to see millennials 'catching up’ a bit to Baby Boomers and Gen Xers," Mangla said. At the same time, "it's still small compared to the older generations, as those generations made significant gains as well over the past two years," she added.
Part of this is because older generations have had more time to build their wealth and also benefited from low housing costs, tax reductions, stock market upswings, low tuition, and lower interest rates.
Millennials are still grappling with debt as well. While student loan payments have been paused for the time being, 62.6% of their debt is embedded in home mortgages.
Consumer credit accounts for another 35.6% of millennial debt, more than any other generation. Mangla stated this was "worrisome," particularly against the backdrop of inflation as food and energy prices remain elevated.
The Federal Reserve is expected to keep raising rates throughout the year in order to combat the inflationary environment, which likely means higher interest rates on credit cards and people paying more for their credit purchases consequently.
Those with higher credit scores are typically able to obtain lower interest rates on credit cards and loans, while individuals with lower credit scores result in higher interest rates — in turn making purchases and loans even more expensive.
"Figure out a plan to pay that down or a way to consolidate it," Mangla said. "Try for near-zero or low-percentage credit cards, which are dependent on an individual's credit score, which is one of the most important things nowadays."
Ethan is a writer for Yahoo Finance.