Every generation has their own approach to money, saving and investment. This is because your attitude to money is influenced by your experiences. Other people in your generation have lived through the same major events in their lifetime and have been shaped by them. It doesn’t make us identical, and shared experiences can have different outcomes.
This blog explains how each generation deals with money, whether hoarder or spendthrift.
Which generational tribe are you in?
These years can vary depending on the source, but this should give you an idea of what generation you fit into.
The Traditionalists lived through the hardships of the Second World War and rationing. Understandably, they watch every penny. This has made them thrifty and they detest waste. They are known for fixing things rather than replacing them. Clearly, they were not raised to regularly upgrade their gadgets.
It’s typical of Traditionalists to be DIY-ers. If something needs doing around the house, they will clean it, fix it or build it.
Many Traditionalists and their families were educated via the School of Hard Knocks; the end of the First World War, the Great Depression and the onset of the Second World War. They learned that they needed to store money away to weather economic storms. This generation is careful with their finances. They balance their cheque book and save for a rainy day.
Even the youngest Traditionalists are now approaching their 75th birthday. Research from Age UK shows that half of over-75s are living with a disability. If the free BBC TV licence is withdrawn for the over-75s, 50,000 could be pushed below the poverty line.
Bricks and mortar represent a fair proportion of their wealth, despite regular income being modest. This tribe want to help their grandchildren and are willing to pass on money if they can. Downsizing or a form of equity release is an option.
The Boomers were the generation brought up just after the Second World War. Their parents lived through rationing and penny-pinching. This instilled the famous ‘make do and mend’ attitude. Some went on to be flower power hippies and part of the Swinging Sixties generation.
Boomers have been financially successful and are coined as being the wealthiest generation, benefitting from high salaries, free education, soaring property and investment values, inheritances and final salary pensions.
In 1969 the average first home cost £4,000 and the typical buyers were 25 years old.
The housing market took off and the homeowning baby boomer house values soared. As a result Boomers view property as a solid investment.
It doesn’t matter if the Boomers are in the UK or the USA, decades of market highs and lows (more highs than lows) have turned Boomers into seasoned long-term buy-and-hold investors. They now want to protect what they have got and to keep investing costs low.
Boomers are attracted to well-balanced portfolios and income-generating investments. More than half of boomers surveyed believe that the market will go higher than it has in the past five years. As a generic tribe Boomers are positive about investing.
According to the Innovate UK blog, Boomers want to spend their wealth rather than simply save it for future generations.
Some Boomers are hoarding their wealth, property and boardroom positions by refusing to retire or to pass money on. This doesn’t mean they aren’t enjoying the luxuries in life. Boomers spend almost three times as much on holiday accommodation when compared to their children’s generation, the study found.
If you want to get into the mindset of a typical Boomer, they relate far more closely to the lives of their children than they do to their parents. They are also willing to invest in new things, especially ones that they want, when it comes to experiences, services, health and fulfilment.
Gen X are often referred to as the forgotten generation. They were the generation to invent and innovate in technology. The inventors of smart phones and Facebook, Gen X graduated from university and faced an economy that brought with it a brutal reality. The expectations of a wealth of career opportunities and financial stability were stripped away as they experienced one economic downturn after another. Bad timing.
The Gen X who grew up in the Thatcher era developed a ‘work hard play hard’ attitude. Many Gen X types have become entrepreneurs: Elon Musk, Jack Dorsey, Michael Dell, Andrew Wilson, Larry Page and Sergey Brin, Jeff Bezos, Julia Hartz and Sheryl Sandberg to name a few.
Investing for Gen X hasn’t been smooth. There have been a few ups and downs in the stock markets during their adult life. This has resulted in Gen X being particularly prone to the emotional buying and selling of stocks. High or low emotions when investing for the long term are best avoided.
Gen X are burdened with juggling the cost of their parents’ nursing care and funding their own ‘boomerang’ adult-children who have returned to the family home. This means they aren’t able to prioritise saving for their own retirement.
But boy, can they spend! According to Fidelity, Gen X spend more each week than any other tribe. Gen X spend 15% of their weekly budget on transport, which includes rail, road and air fares – more than they spend on food and housing costs.
On average, these households spend £126.39 per week on lifestyle-related spending, more than any other age group. Lifestyle spending is all by nature ‘discretionary’ and goes on restaurants, hotels, cocktails, takeaways, smartphones, cinema and guess what? Gambling.
Unlike earlier generations, Gen X types don’t have automatic trust. They like to do lots of online research. And they use friends on social media for tips and recommendations. Reviews and comparison sites are a go-to commodity. Evidence, not just words, works best when dealing with Gen X.
Millennials have been coined the extravagant avocado-buying generation, that will never make it on to the property ladder. Their other tribal moniker is Snowflake (often used in a derogatory way).
Fight Club the movie – “You are not special. You are not a beautiful and unique snowflake.”
Older millennials were hit by the 2007-2009 global financial recession early on in their career, which meant that getting on, and then staying in, the job market was a struggle. Younger millennials felt the financial pain of increased university fees, slow wage growth and property price hikes.
This is the tribe that smartphones were designed for. Technology and apps that can be used in real time without talking to a ‘suit’ are what they want. No time for messing around. Banking apps that help them to save money each month results in Millennials being savvy savers.
The Moneywise website has a good article here. Growing up in periods of low-interest rates means that Millennials are comfortable with long-term investing and auto-enrolment for their pensions. To many of them, ‘risk’ means ‘opportunity’.
Unsurprisingly, Millennials spend their money far differently from how other generations do. For starters, typical Millennials spend about 40% of their income on housing (rent, mortgage, utilities).
The house and family may be on the horizon, but for now, being sociable and having fun experiences are high on the list.
Millennials like authenticity, for instance locally sourced brands and shops, and try to avoid global chains if they can. Personal service and attentiveness count. They are also increasingly cashless, using smart cards and smartphones to pay. They also adore online shopping and home delivery.
It's not hard to see the pros and cons of how each generation spends, saves and invests money. Understanding and knowing why you behave in a certain way can help you improve and adapt your behaviour to get a better outcome in the future. Could the Millenials learn a few money-saving tricks from the Traditionalists? Could Gen X learn a little about investing from Baby Boomers? Each generation could learn a lot from each other's triumphs and mistakes.
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