On Building Wealth

A few weeks ago, I was riding in the back of a Lyft driven by a teenager who told me that he’s driving for Lyft and day-trading on the Robinhood app to make summer money, and it struck me just how different Gen Z’s relationship is to the stock market than mine was as a teenager (my first exposure to the stock market was being gifted a piece of thick paper that formally declared I owned exactly one share of stock in Exxon Mobile (don’t worry... I have since fully divested)).

We’re in an age of booming access to financial markets, and this has profound implications for wealth building across races, genders, generations, and classes. In 2020, US households accumulated $12 trillion in new wealth (at a wealth-building rate unprecedented in recent history). Stunningly, 50% of all this new wealth came from one place: rising stock prices (rising house prices accounted for only 17% of new wealth created). It’s no surprise that participation in financial markets is a powerful wealth builder, but the problem and nuance are in how unequally Americans participate in these markets: only 33% of Black Americans own stocks compared with 61% of White Americans. If you play with this interactive chart from the Federal Reserve, you can see how wealth has been built (or not) across race, age, and wealth distribution. The rate of wealth building in 2020 was fastest amongst older, White populations, but the rules of wealth building are shifting with new trends led by Gen Z around retail investing. Say what you want about Robinhood, but retail investing platforms could be some of the biggest drivers of wealth-building amongst populations who have traditionally not participated in the financial markets: 63% of Black Americans under the age of 40 are now participating in the stock market, and 29% of young Black Americans became first-time investors in 2020, compared to 16% of White Americans (source).