How each individual views personal finances is determined by a wide variety of things: where we grew up, how our parents viewed money, and, importantly, the times we live in and the stage of life we’re at.
In order to take a closer look at the differences in how generations view money, it is helpful to have a common understanding of how we define them. While there are always some discrepancies in how the generations are identified, for our purposes, this is how we will use the terms: Silent Generation (1945 or earlier), Boomers (1946 to 1964), Generation X (1965 to 1980), Millennials (1981 to 1996), and Generation Z (1997 or later).
Let’s take a closer look at some critical differences in how the generations view money.
Higher Education & Jobs
While not inherently a financial principle, how many people view education and its purpose is closely tied to how they view money. When it comes to being college-educated, millennials lead the pack, with a third of this generation holding at least a bachelor’s degree.1 For Generation Z, higher education is typically viewed to ensure a stable career, so they usually choose majors with job availability in mind. Furthermore, Gen Zers are more likely to relocate, work evenings and weekends, and work freelance jobs to achieve their financial goals.2 While millennials are also likely to switch jobs at higher rates than older generations, their reasons for doing so are typically motivated by other factors that are not financially-related (i.e., convenience, passion, etc.)
Saving & Spending Habits
In regard to spending, the differences between generations are apparent. Gen Zers primarily spend their money on eating out, housing, phones, and transportation. Compared to the other generations, Generation Z is more motivated by the desire to afford material items as a marker for achieving financial success.3 On top of this, many Gen Zers exhibit more frugal habits, leading us to await how this more practical approach to money will impact them in the long run.
And what are millennials’ spending habits motivated by? Convenience. While this generation is generally known for some of their “irresponsible” spending habits, “81% of millennials felt confident in their ability to achieve their financial goals, compared to 65% of Generation X and 54% of Baby Boomers.”4
One spending category that all generations have in common is housing, as it’s the biggest expense for all age groups. There is also some consistency in the spending category of entertainment being one of the largest, but Gen Zers typically spend the least in this area, most likely due to the types of entertainment they are consuming (watching TikTok v. cable TV).5
One significant difference in category spending is in healthcare, with the Silent Generation spending the most, which steadily declines across the generations, with Gen Z spending the least in this area. 5
It is common for Gen Z to be aware of and comfortable with handling basic financial principles, such as managing day-to-day expenses and building credit. Still, they lack preparedness regarding future planning and long-term planning principles (i.e., emergency funds, retirement savings, and investing).3
This being said, it brings into question where people are looking for financial wisdom and advice. Interestingly, a large majority of Gen X, millennials, and Gen Z have expressed wanting assistance from their employers for certain financial services (such as refinancing mortgages, understanding a health savings account, and making the most of their equity compensation). Boomers, however, are at the other end of the spectrum, with less than a third wanting help.6
As you can see, there are a lot of mindsets and attitudes toward financial principles that differentiate one generation from another. It is clear that a person’s unique circumstances and societal standards during pivotal times of his or her life will largely impact the way that person views money. It is important that you consult with your financial advisor about specific questions you may have so that they can guide you along a path to help you pursue your financial goals.