Understanding How Other Generations Think About Money
Kids these days! How many times have you heard…or even said this?
Parents these days! Yes, your children will be saying this someday, if they aren’t already.
There is an ongoing disconnect between generations and the way they think about a lot of things, including money. This is evident in any family, so the good news is that you are not alone. The bad news is that most people ignore that these differences exist, often resulting in a sad story about keeping family relations. And apparently, no generation is exempt from this assessment. Let me explain.
Let’s look to the “silent” generation, born between 1928-45, first. If you are a baby boomer (1946-64), you are acquainted with this generation well. Most of the silent generation grew up on the heels of the Great Depression and World War II. The old adage that we are a sum of our experiences is nowhere more apparent than with this generation. They were sparing with every dollar and devout savers… primarily of cash. If you have helped a parent or grandparent from this generation with their finances, you probably discovered things that shocked you. Perhaps it was a stash of cash or jewelry in the freezer or buried in closets, or a surprising number of bank accounts. If you settled their estate, it may have taken you a good while to discover everything they owned. Yet the most notable characteristic is that they were silent. The majority don’t or didn’t talk about money, and often resulting in a mess for their kids simply because they knew nothing. You might have a mom or dad that needed help at the end of life in this generation and this made things pretty frustrating. Perhaps you were an heir to this generation. You may not even have known where their Wills were, much less what it said or why it said it.
Since we are a sum of our experiences, many Baby Boomers have taken heed to what they witnessed with their parents. They can’t bear the thought of their children being forced to take care of them and they don’t want to leave them a financial mess. For some, the answer to these problems is simple—spend it all! A recent Schwab survey of more than 1,000 high net worth families showed that 79% of Boomers are on board with this thinking.1. The reality, though, is quite different. This is the wealthiest generation in our country. Although the Boomers enjoy the finer things in life and name brands, they were taught to work hard and save a lot, so most have done just that. Ironically, many of them find themselves the primary heir to the silent generation in another way: Because they plan to spend it all, they don’t plan… thus placing their heirs squarely in the same boat they were in.
Let’s skip a generation and talk about Millennials. (We’ll come back to Gen X, 1965-80, in a moment and you’ll see why.) Most Millennials - born 1981-96 - are children of Baby Boomers. I heard Jason Dorsey, an acclaimed generational researcher, speak years ago. He talked about the fact that this is a split generation with two very different mindsets and it boiled down to one key moment: high school graduation. Baby Boomers remember this moment as the one when they had their bags packed and ready to leave home. Their parents would say goodbye, express how proud they were and let them know they were on their own. This was pivotal… and also created a little emotional baggage. Those same boomers would have a different message for their millennial child. When the time came for this child to graduate and pack their bags, their parents would say goodbye, express how proud they were and let them know that as long as they stay in school and maintain good grades, they would pay the bills. This created the lifetime student. And, oh by the way, the other half of the millennial generation despises being lumped in with this. To make matters worse, they grew up in a household that was no stranger to spending money. Today they make up 75% of the global workforce. 2. It is assumed they will not accumulate wealth like previous generations primarily because of two things—about half of them are late bloomers and that all of them value work-life balance. Even though they may be saving, they probably aren’t saving enough. And to make matters worse, they take advice wherever they can find it. They discuss finances with everyone and tend to fall prey to online financial advice, good or bad.
Now back to Gen X, otherwise known as the forgotten generation. This generation, born between 1965 and 1980, is living in a time when they can justify rolling their eyes at every other generation. This self-reliant and skeptical generation began adulthood straight out of high school, with student loans, keeping up with the Joneses or shall we call them “Boomers” in respect to technology, housing and their spending craze. They entered the “Decade of No Returns” a.k.a. “The Great Recession” as they began saving for retirement, which took a hit both on their dollars and their mindset. Today they are at that peak earnings age and climbing out of debt, feeling the pressure of wanting to retire and not knowing if they have enough as well as being sandwiched by support to both their adult children and their parents. 61% of this generation don’t think they will achieve their retirement goals and 45% don’t have a retirement plan at all. 3. These are painful statistics when the reality is that they probably need the latter more than any other living generation at this point.
Gen Z (1997-2012) are often called the Centennials. They are mostly children of Gen X, which may be a good thing. They watched the Boomers raise the Millennials and well…. Let’s just say they chose a different route. Gen Z, though, is very different. Their DNA includes technology. They are all about efficiency and don’t exhibit much of an attention span. The interesting thing is that even though the oldest Centennial was born in 1997, 54% of them hold some type of investment. That being said, 44% who are not investing say it is because they don’t know where to start. 4. They are truly the generation of information overload and the biggest challenge is for them to slow down long enough to get sound advice.
Albert Einstein once said, “Any fool can know. The point is to understand.” It is easy to throw our hands up when we are trying to help another generation financially, especially when it is our kids or parents. The reality is, though, that their experiences with money are far different from yours. If you want to help, step into their shoes. Educate yourself on how and why they might be thinking about money. Who knows, it might shift the tides for future generations as well!
- https://fortune.com/article/great-wealth-transfer-delay/
- https://www.purdueglobal.edu/education-partnerships/generational-workforce-differences-infographic/
- https://www.cnbc.com/2024/06/05/op-ed-how-gen-x-can-transform-worrying-about-finances-to-flourishing.html
- https://www.investopedia.com/generation-z-stepping-into-financial-independence-5224362