The economic conditions in which you’ve grown up have undoubtedly influenced your financial habits and attitude toward money, whether you realize it or not.
The result is that each widely-recognized generation group in the last several decades has drastically different statistics for spending and saving, as well as notable pitfalls and strengths.
Here’s an overview of the differences in the spending and savings habits among Baby Boomers, Generation X, and Millenials.
Baby Boomers (1945-1966)
Baby Boomers are the post-World War II generation that experienced a period of great opportunity, privilege, and economic affluence. This generation had great opportunities for education, high-paying jobs, and pension plans. These trends led the generation to heavy spending, as well as heavy saving.
The economic conditions prior to the recession helped Boomers save money; unfortunately, recent economic conditions such as the loss of 401K savings, the drop in home values, and the rising cost of healthcare have caused Boomers’ savings to take a hit.
The majority of Baby Boomers are very concerned for their retirement income and are actively investing. Many plan to keep working past retirement age in order to avoid financial problems.
Generation X (1966-1982)
Generation X is largely stereotyped as high spending and alarmingly lacking in savings. Although Gen Xers haven’t spent more overall than Baby Boomers, they’ve spent more per household than the previous generation. The spending of Generation X is due in part to the example of Baby Boomer spending.
The problem is that the generation has also suffered the economic effects of unemployment, higher inflation, increased education costs, declining stability of traditional businesses, and the projected bankruptcy of the Social Security system.
Although recent studies state that roughly one third of Generation X is feeling more confident about their financial stability, the majority have very little retirement savings, a lot of debt, and no plans to save for their future.
At 70 million strong, the Millenials (aka Generation Y) is the largest generation since the Baby Boomers. This would be encouraging if Generation Y were in a position to make a positive financial impact, but the truth is that this generation is the worst off.
Late Generation X and Yers have fallen prey to the easy credit policies that were prevalent before the recession. Starting off in even worse financial situations than their parents, who often didn’t have the means to help them through college, Generation Y young adults have an estimated $30,000 in student loan debt and an average of three credit cards each. This, coupled with a neglect of savings, have left them very susceptible to unemployment, high costs of living, lack of health insurance, and other financial problems.
They’re seeming to adapt, however, and the generation is shifting toward more cautious spending, as well as a focus on building a savings cushion for their future.
Learning from the Past to Better the Future
Each generation outlined here has made its share of financial blunders (some at a high cost to future generations), but it’s not too late to change. Regardless of where you fall in this timeline, you have the ability to learn from your parents’ mistakes in order to avoid the same pitfalls.
You can correct your own personal money habits by eliminating debt, living on less than your means, and saving for the future. Most importantly? You can pass on a good example of solid financial principles to the next generation.
Which generation are you in? Did the description above fit you?