There are several ways generations differentiate themselves from one another. While cultural values, political opinions and attitudes toward education are a few of the more obvious differences, one that is often overlooked is the approach different generations take to money management. Over the last 70 years, four different generations have come of age, and each one has had its own unique approach to handling money.
Baby Boomers: 1946-1964
The Baby Boomer generation was born and raised in the climate of general financial prosperity that defined the post-WWII era. Their parents were considerably wealthier than earlier generations of Americans, but many still remembered the belt-tightening of the Great Depression and followed habits developed in their youth to cut expenses wherever possible.
The Baby Boomers, however, had no such recollection of times of poverty, leading them to take full advantage of the wealth that had built up in the American economy. Baby Boomers often were able to secure excellent standards of living in jobs that did not require a college education, allowing them to buy non-essentials at a rate that rarely existed in previous generations.
This mentality of prosperity allowed many Baby Boomers to become wealthy by investing the extra money they made, but also made others complacent in well-paying industrial jobs that eventually dwindled due to technological advancements.
Generation X: Late 1970s-Mid 1980s
Growing up in an economic environment that was more geared toward specialization, members of Generation X typically pursued rigorous education to become professionals. Though willing to invest in this way, Generation X was much more conservative with its money than the Baby Boomer generation.
Spending on luxuries was less common among this generation, partly because industrial blue-collar jobs with high wages were drying up as they entered the workforce. This generation did, however, develop an investment mentality, with many Generation Xers building stock portfolios as a means of building longer-term wealth.
Millennials: Late 1980s-Mid 1990s
Millennials ultimately took on some of the money management habits of both Generation X and the Baby Boomers, without completely mirroring either one. Like Generation X, Millennials grew up in a world of dwindling well-paying jobs for those without college educations. Their approach to spending, however, more closely mirrors that of the Baby Boomers, as Millennials are often willing to spend money to live in comfort.
This has led to a much more positive attitude toward debt in this generation, with same-day loans, like the payday loans in Dallas, TX, and other loans being considered relatively commonplace. Debt is seen not as a step back but as a step forward for the future. The favorable opinion, though, is to not go into debt unless you know you can pay it off.
In matters of investment, Millennials tend to mirror Generation X, with many Millennials getting started in the world of investment at relatively young ages to build wealth over their working lifetimes.
Generation Z: Mid-1990s-Early 2000s
With its members just now entering the market, Generation Z has not yet created a comprehensive economic profile for itself. So far, however, this generation has shown itself to be an interesting mixture. Most members of Generation Z worry about high debts, especially in college tuition, and are fairly likely to save money when possible.
Conversely, they are also a generation that tends to be very willing to spend on goods and services. With less positive attitudes toward debt than Millennials but a clear love of consumable goods, it is not yet clear where the financial priorities of Generation Z as a whole lie, especially with regards to investment.
Each generation’s approach to money management is not just a trait of people of a certain age, but also a reflection of the economic and historical climate that produced them. Advances in technology and rapid economic changes have had a profound impact on how each of these four generations views money. Future trends will, very likely, produce new generations with even more diverse approaches to how money is handled.