Financial habits of Boomers, Gen X, Millenials

Each generation, from Boomers to Gen X to Millennials, have specific attitudes towards money and saving influenced by when they grew up and the realities of their life stages.

“Understanding what motivates your generation to save can help identify useful financial planning strategies for each stage of your life,” says John Tracy, senior vice president, TD Canada Trust.

Read: Selling across the generations According to Dr. J Bruce Morton, Department of Psychology, Western University Canada, saving for the future touches on a fundamental trade-off in human decision-making, namely balancing the opportunity for small immediate rewards with an interest in larger long-term benefits.

How each of us balances this trade-off depends in part on values, priorities and motivations, which are influenced by the world we grew up in.

“While every person makes decisions based on what makes the most sense from their vantage point—specifically how to maximize gains and minimize losses—what seems reasonable to some individuals may not be reasonable to others,” says Morton.

Millennials (1982-1999)

Over half (65%) feel they’re spending too much money (versus 56% of Gen X and 44% of Boomers), finds TD. They’re also the most likely (55%) to feel there is more they need to know about the savings and investment options available to them (versus 51% of Gen X and 45% of Boomers).

Read: Gen Y wants social media insurance “Perhaps the defining factor for the Millennial generation is persistent economic uncertainty,” says Morton. “Faced with job market challenges and an uncertain economy, Millennials may find it difficult to envision a concrete future, making saving for the long-term seem less reasonable.”

Read: Gen Y: Your future clients For Millennials who feel it will be difficult to save money, Tracy recommends setting up an automated savings plan that invests a set amount at regular intervals into an RSP. Contribution amounts can start small and increase as income grows.

Gen X (1965-1981)

Of the generations surveyed, Gen X had the most competing financial priorities, with saving for retirement (55%), paying off mortgages (44%), paying off loans (38%), paying down credit card debts (37%), and creating emergency savings funds (37%) topping the list. With so many priorities, it’s not surprising that 70% feel they’re not saving enough.

Read: Gen X squeezed by boomers, Gen Y

“Gen X individuals grew up during a period of unprecedented economic transformation marked by greater fluidity in the job market and the elimination of mandatory retirement,” says Morton.

He adds, “These larger economic forces have led to a shift away from traditional notions of career and retirement. As a result, many Gen Xers anticipate working well into traditional retirement years.”

Compared to other generations, Tracy adds, Gen Xers often have an abundance of competing financial priorities, making it challenging to carve out money for retirement savings. Even though Gen Xers may feel the need to postpone retirement, it’s important to contribute regularly during peak income earning years to build a comfortable nest egg for retirement.

“As a general rule, Gen Xers should aim to save enough to have 60% to 80% of their annual working income per year to live on during retirement if they don’t want to change their lifestyle,” advises Tracy.

Boomers (1946-1964)

While 79% feel confident they’re managing their money well, the majority (56%) are still worried about having enough.

Read: Goodbye retirement? “As part of the post-war generation, Boomers were not only influenced by parents who survived the Great Depression, but many have also enjoyed economic affluence and employment stability throughout their career, making saving for both the short and long-term appear sensible,” says Morton.

Read: Gen X, boomers, on same retirement page Tracy recommends Boomers assess how much they’ll need in retirement to maintain the lifestyle they want. Then work backward to develop a realistic plan that includes lowering or eliminating debt prior to retirement to free-up income.