Is a 22-year-old with a college degree and a job better off financially in 2021 than in 1991? Here's what the numbers show

The CPI tracks inflation, but it is not a comprehensive measure of the cost of living.

Kiersten Schmidt/Grow

As the U.S. continues its recovery from the short-lived coronavirus recession, concerns about dramatic increases in inflation have escalated. The consumer price index, which tracks the prices you pay for a variety of goods and services, increased 5.4% in June 2021 from a year before. That's the highest jump since 2008.

While the CPI is the primary statistic for tracking inflation and deflation, it doesn't tell the whole story of how prices change over time, as it is not a comprehensive measurement of the cost of living. Different goods and services increase in price at different rates, and if necessities like rent and groceries increase more than the cost of a flight or a movie ticket, you're likely to feel more of a pinch.

And while incomes tend to rise with prices, they don't necessarily go up at the same rate. You might have heard your grandparents reminisce about how a gallon of gas used to cost a nickel, but without knowing how much money people earned at that time, it's impossible to really know how that price compares to today. So to understand how the value of money has changed, it's important to consider the salaries workers got as well as the prices they had to pay.

For example, an employed 22-year-old with a college degree in 1991 was making less money than a comparable 22-year-old in 2021, even adjusting for inflation. But if you look at the full financial picture, you'll see why the higher salary doesn't make as much difference as you might expect.

The rise in price of necessities like rent, student loan payments, and health care leaves Jacob with less disposable income in 2021 than Lisa would have had in 1991. Lisa winds up with an extra $227 per month, or about $2,700 every year. Even with a higher salary and lower taxes, his paycheck doesn't go as far.

These higher costs make it difficult for someone today to achieve the same standard of living as someone 30 years ago. If you have to live in a smaller home or one farther away from your job due to higher costs, for example, or you have to adjust which groceries you buy because the ones you want are too expensive, that affects your standard of living. But the CPI wouldn't reflect the impact of those kinds of decisions on you, because they don't change your overall expenses.

Making smart money moves can help you get ahead

Since it's more challenging to reach financial milestones with less disposable income, it can be even more important to get the most out of your money. Making sure you know how to prioritize financial goals is an important first step, and you'll want to start by building up an emergency fund, experts say, so that you'll be able to handle a crisis without going into debt.

Once you've built up an emergency fund, consider investing some of your money rather than keeping it in a savings account. This can help you grow your wealth through higher returns and the power of compound interest. Historically, the S&P 500 has averaged an annual return of about 10%, while savings accounts with the highest yields are currently offering rates of about half a percent.

Grow's compound interest calculator can help you see how your money could grow through investing over time. If you're feeling behind on saving for retirement, Grow has a calculator that can help you get on track.

Millennials and older members of Gen Z, who have already lived through at least one recession as adults, face financial challenges that previous generations did not. But by making good decisions with your money you can still reach your financial goals, especially with one important asset on your side — time.


Financial figures for Jacob and Lisa are estimates of incomes and costs for a typical 22-year-old with a bachelor's degree. Income estimates are based on the medians for those aged 21 through 25 with bachelor's degrees, from the Census Bureau's American Community Survey in 1990 and 2019, and did not factor in a gender or racial wage gap. Student loan payment estimates come from a data analysis by higher education expert Mark Kantrowitz. All other spending figures are from the Department of Labor Consumer Expenditure Survey for those aged 25 and under for the years 1991 and 2019, the most recent year data is available. Figures for 1991 were adjusted for inflation using the CPI inflation calculator from the Bureau of Labor Statistics.

Illustrations by Euralis Weekes

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