Each generation is different from those that come before and after it. There are a lot of complicated reasons for that, of course. Put simply, though, society shapes us. Therefore, what we experience as we grow up tends to shape our behavior. This is particularly true when it comes to money. Of course, within each generation there is a wide spectrum of behavior and beliefs. Nevertheless, numerous surveys and studies show us the general trends within each of these generations.
Culture and Age Both Shape Our Money Habits
Millennials and baby boomers had such vastly different experiences that they seem to see money entirely differently from one another. The defining moments of the mid-twentieth century are vastly different than those shaping people at the end of that century.
Plus, of course, we have to look at where each generation is today. Baby boomers are about retirement age. Millennials, on the other hand, are in the early-to-mid stages of their careers. Life is just different for each generation – both in what shaped them and in what concerns they are faced with at the moment.
The Middle Class is Shrinking
The majority of people in any generation live in the middle class. It’s a bell curve, with some people in poverty and others on the wealthy end. However, the average person is, naturally in the middle. Except there’s a problem for millennials; the middle class is shrinking.
Quartz reports that when the baby boomers were in their 20s, nearly 70% of them were in the middle class. In contrast, only 60% of millennials were middle class at the same age. More millennials are entering that uber-rich class than ever before but more are also slipping into lower-income brackets. This ultimately affects all different aspects of saving and spending.
Home Ownership Priorities Are Different
Owning your own home was an important thing for the baby boomer generation. They were often second-generation immigrants, whose parents came to this country in order to chase The American Dream. Owning your own home was a sign of that middle class status.
It’s not so easy for millennials to buy a home today, in part because of that shrinking middle class. Housing costs have gone up dramatically. A middle class person spends about one-third of their disposable income on housing. Business Insider, citing a SmartAsset study, reports that in some cities the difference between median-income and median-home price is so large that it now takes a person with a median income almost ten years to save enough just to put down a 20% down payment on a home.
That’s one reason that millennials are waiting longer than ever to buy houses. Plus, for a variety of reasons, home ownership just isn’t the priority for millennials than it was for baby boomers. Moreover, since millennials are more likely to rent than own, they tend to pay a lot more for housing. They rent for longer and rent prices increase all of the time. As a result, baby boomers currently spend less each month than millennials on housing.
The Problem of Student Loan Debt
Student loan debt is the other big cost that eats at millennials in a way that just didn’t happen to baby boomers. First of all, it was easier for baby boomers to get a job without a college education, especially an advanced degree. Second, the cost of college has gone up considerably from then until now.
As a result, six in ten baby boomers never had any school debt, whereas nearly 3/4 of millennials took out student loans. Of course, baby boomers who did take out loans have had more time to pay theirs back. About 25% of baby boomers do still have student loan debt. It’s closer to 50% of millennials.
The one way that millennials are doing better in this area, though, is that individually they tend to owe less. Those baby boomers who do currently have debt are more likely than millennials to owe over $50,000.
Other Core Money Differences Between Baby Boomers and Millennials
Baby boomers have more set aside for retirement. This is due in part to the fact that they are older and have had more time to save. However, the Great Recession caused many millennials to delay starting to save for retirement. Therefore, they have less than they “should” for their age in comparison to baby boomers. Perhaps because of that, millennials are more likely to feel that they may never retire.
Baby boomers also have more money in savings in general. This is likely due to a combination of age (having more time to save) as well as the changing income and higher housing/debt costs for millennials. Currently, 30% of baby boomers have more than $15,000 in a savings account. Only 16% of millennials have that much. In fact, more than 50% of millennials have less than $5000 in savings.
Here are a few other findings:
- Baby boomers spend more money on healthcare. Millennials are more likely to forego healthcare due to cost. This could be due in large part to the current age difference between the generations.
- Grocery spending is different. Baby boomers are likely to spend between $100 and $500 per month on groceries. Millennials are more extreme. Many more of them spend either less than $100 or more than $500.
- Millennials are also likely to spend more money dining out at restaurants than their baby boomer counterparts.
- Car prices are higher and millennials are more likely to live in cities so they are less likely to pay to own a car than baby boomers are.
- In general, millennials tend to like buying “experiences” whereas baby boomers are more likely to buy “things.” Keeping up with the Joneses was definitely a baby boomer concept. Millennials are more likely to compare lives via Instagram, where activities and events are more visible than items.
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