Wealth Accumulation Patterns Among the Younger Generation in Britain
Posted: 19 May 2020
Date Written: July 17, 2019
This paper examines how Britain’s younger generation accumulates wealth by developing a typology of savers. It proposes a Balance Sheet approach, which enables reorganising wealth data into more nuanced categories of wealth-building vehicles. Latent Class Analysis is performed to establish the saver types, based on the reorganised individual balance sheet data using the Wealth and Assets Survey. Four distinct saver types are established: undersavers, property saver-dissavers, traditional savers and investor savers. Transitions between saver types are studied using Latent Transition Analysis. These saver types provide insight into perceptions and utilisation of wealth accumulation channels. While the transition probabilities are mostly stable, the patterns of upwards and downwards transitions vary by parental homeownership. People with a higher individual and parental socio-economic characteristics are more likely to be allocated to saver types with more wealth. The findings from this study have important long-term policy implications for the younger generation’s future economic well-being.
Keywords: Wealth accumulation, factor mixture modelling, latent class analysis
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