If you ask recent college graduates what they plan to do with the money to buy a house one day, most won’t say “save.” Instead, they’ll say things like “invest,” “start a side hustle,” or “start a side hustle.” why? Many young people are no longer considering a path to homeownership, which 82 percent of Americans consider to be the core of the American Dream.
Over the past decade, the proportion of people under 25 with an investment account has increased sixfold. But much of this activity doesn’t resemble what we normally think of as traditional investing. Two out of ten Gen Z investors invest exclusively in cryptocurrencies. Half of Gen Z and almost half of Millennial investors trade stocks weekly or daily to follow short-term market movements, rather than making long-term investments. At the same time, the explosion of gamified intermediaries, sports betting apps, and prediction markets has made speculation and gambling possible on almost any mobile phone.
What emerges is a far more serious economic trend than playing a game of poker, buying the occasional lottery ticket, or betting on the Super Bowl with your co-workers. Fearful that traditional paths to success and security are rapidly disappearing, young people are pouring their savings into high-risk, high-reward strategies.
Imagine you are a young adult who has just graduated from college. Degrees paid for in part by student loans seem increasingly useless in an ever-changing job market that employs fewer people and more robots. Most of the evening is spent entering resumes into online portals, and half of them disappear without being automatically rejected. The other half of potential employers will politely tell you they want at least a master’s degree for an entry-level role.
Let’s say you beat the odds and miraculously secure a solid starting job in Boston that pays $80,000 a year. After taxes, your take-home pay is about $59,000 a year, or about $4,900 a month. What may at first glance seem like a sound foundation for a financially stable life can quickly turn into a daunting expense book. The average rent for a studio in Boston is about $2,800 per month, which accounts for almost 60% of your monthly salary. Filling your apartment with roommates only reduces your rent to about a third of your salary. Once you’re done with rent, groceries, transportation, car payments, and student loans, there’s nothing left to save.
And now, in the midst of roommate squabbles and broken dishwashers, there is somehow an expectation as we begin to think about eventually moving into our own home, or even making a down payment on one. The typical home in Boston costs over $1 million, and requires a six-figure down payment just to move in. Anyone can counter with the optimistic phrase, “Just commute to the city!” The median home price across Massachusetts is approximately $600,000. For most young people, this math doesn’t apply anywhere in the state.
But there’s something deeper than numbers here. Even if you can save money, the value of your cash will decrease due to inflation. Each dollar set aside in 2020 can currently buy only about 80 cents worth of goods. So, to buy something that was worth $1 back then, you now need $1.25.
When the future is this bleak, young people begin to feel like they are falling behind, even if they are doing everything “right.” When the traditional methods of getting a degree, getting a job, and carefully saving don’t come close to coming up with a down payment on a home, taking bigger financial risks starts to seem less and less reckless and the only option. When your paycheck can’t keep up with your monthly expenses, much less the price of your home, it’s easy to stop believing that your patience will pay off.
In effect, the lottery economy is no longer limited to the poorest households. When low-income people feel financially stuck, they are more likely to buy lottery tickets, creating a regressive tax on despair. This logic is now driving how young people approach their money. The idea of one big win, whether it’s a parlay, a meme coin pump, or a lucky options contract, promises the kind of financial success that savings can no longer guarantee.
This impulsive behavior is facilitated by a financial infrastructure designed to maximize engagement. Today’s low-fee or free investing and gambling apps encourage users to place more bets, enter into more trades, and risk larger amounts of money.
This extreme level of risk-taking is not as irrational as it may seem. If young people continue to believe in traditional savings strategies, most won’t bother trying day trading or chasing crypto moonshots. But they believe they have no other choice. A few winners of this game will no longer have to worry about future mortgage payments. For the vast majority, the economic impact will be devastating.
Until the basic calculus of adulthood begins to make sense again, more young Americans will find themselves driven to risky speculation. Not because they want to get rich quick, but because they fear they will never experience their parents’ American dream.
