Talking ‘Bout My Generation: The Real Financial Deal for Gens X, Y and Z

Talking ‘Bout My Generation: The Real Financial Deal for Gens X, Y and Z

These days it’s easy to get mired in the generational alphabet soup.

No matter what day of the week it is, it seems that a new study pops up about the woes of Generation X, the expectations of Generation Y, and the wait-and-see predictions of what will come of Generation Z.

And no two studies seem to come to a clear agreement on what those all are.

Heck, they can’t even come to an agreement on when each generation technically begins and ends, which means many of us are likely on the cusp of one or the other.

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So we decided to mine through piles of research and crowds of talking heads to figure out what the real deal is, providing a financial snapshot for each of the post-Boomer generations.

The goal: Get some insight into their cultural mindsets, their financial challenges and what lies ahead that could impact their money.

Yes, some of these findings only reinforce the stereotypical differences we’ve all heard. (Read: Are Millennials really that self-absorbed?)

But others highlight the similarities we seem to have—namely, that the aftermath of the Great Recession has created financial skittishness across the board, even among the youngest of us.

RELATED: The 6 Gen Y Spending Types: Which One Are You?

The Money Mindset of Generation X

Generation X—the 41 million people born roughly between 1965 and 1979—is sometimes called the Baby Busters because the oldest of them came into the world during a decline in birth rates.

The fact that they have a nickname that references Baby Boomers isn't surprising, considering much of their personal expectations about life, money and career has been overshadowed by the accomplishments of the generation that preceded them.

Where They’ve Been As the first generation made up largely of latchkey kids, Gen Xers learned early to be self-reliant. Research shows nearly half grew up in homes where both parents worked, with 2 in 10 coming from single-parent householders.

Their babysitters were likely the technology and entertainment options they had at home: Xers were the first to grow up with home computers, cable TV (hence the MTV Generation nickname) and video-game systems—Atari 2600, anyone?

“They were raised to pursue the American dream—to attend college, own a home and accumulate stuff, from stocks and jewelry to boats and land—just like their parents’ generation,” says Sarah Sladek, the founder of XYZ University, a management consulting firm.

This may help explain their high lifestyle expectations and hunger for consumerism, even though they were often labeled as slackers in their 20s. But this label belies a thirst for entrepreneurism—nearly 39% of Gen X men and more than a quarter of women want to be their own boss.

Now, however, Gen Xers are entering their midlife money crisis. And who can blame them? They’ve lived through a dot-com boom ... only to see the tech bubble burst. And they’ve survived (or haven’t) the layoffs and downsizing of the late 2000s.

Gen Xers were in the most vulnerable position when the Great Recession hit. Overall, they lost 45% of their wealth.

“Gen X is the first to not have job stability and to live through multiple recessions,” Sladek says.

RELATED: The Recession Effect on Gen X

Where They Are Gen Xers are currently juggling the biggest financial burdens because the majority of them are married with at least two children and they own pricey homes—a lifestyle that takes two working spouses to support it. And as a group, its members were in the most vulnerable position when the Great Recession hit. Overall, Gen Xers lost 45% of their wealth, based on data from the Pew Charitable Trusts.

This type of loss contributes to analysts’ predictions that “Gen X could be the first not to have more than their parents,” Sladek says. Exasperating the situation is Gen X’s shrinking middle class: A study by Bankrate showed that the income gap was growing at a rate of 21% over the past two decades for this generation—that’s nearly twice the rate of Millennials and Boomers.

To keep up with their financial obligations, it appears as though this generation is going into debt to get by. Between credit card balances, mortgages and student loans, Gen X households carried a debt load of more than $142,000 in early 2014—some 60% higher than the amount of debt that Boomers have.

Where They’re Going Feeling the financial squeeze, Gen Xers are, unfortunately, giving short shrift to their retirement plans—and it doesn’t help that the recession hit when older Xers were entering their highest earning years.

More than half of Generation X respondents to a Fidelity study were saving less than 10% of their income for their golden years. Other research has shown that’s likely due to prioritizing their housing, medical and kids’ college expenses above saving for their grayer selves. Adding to the problem is a seeming aversion to risk: 4 out of 10 in this age group have 50% or less of their investments in stocks.

To make up for a lack of retirement readiness, many Gen Xers are anticipating they’ll work longer than their parents—which should be doable given that Boomers are going to leave the workforce in large numbers over the next few years.

“Generation X is desperate for the opportunity to move up in their career and to save and make some money,” Sladek says. “They are a small percentage of the U.S. workforce, but because they have been in the workforce for quite some time, the oldest Xers are poised to move into leadership roles vacated by Boomers.”

RELATED: Why You Should Be Worried About Boomers Retiring

The Money Mindset of Generation Y

Better known as Millennials, this demographic includes about 76 million individuals born roughly between 1980 and 1994, making them the largest generation since the Baby Boomers.

But unlike Boomers, this generation is having difficulty finding their financial footing—thanks to record student loan debt and a difficult job market.

Where They’ve Been The stereotype that many people have of Generation Y is of coddled kids of Boomers—which may partly explain why they've been given the moniker, GenMe. Their financial attitudes, in particular, have been influenced by how well their families weathered various economic boom-and-bust cycles.

“Millennials grew up mostly in a time of plenty, but entered adolescence and young adulthood during the Great Recession, so they had a change of fortune during their formative years,” says Jean Twenge, a psychology professor at San Diego State University and the author of Generation Me: Why Today’s Young Americans Are More Confident, Assertive, Entitled—and More Miserable Than Ever Before. “They’ve been exposed to difficult economic times but raised with high expectations for everything—not just money and work but relationships and their confidence about themselves."

Raised on 24/7 connectedness, Millennials also happen to be better educated, more ethnically diverse and tech-savvier than prior generations, but share similar life goals of marriage, children, buying homes—and making a lot of money.

However, when it comes to working hard to attain those goals—well, that’s where a lot of experts, including Twenge, say there’s a Gen Y disconnect. They want much, but don’t feel the traditional need to pay their dues to get there.

“Generational differences are based in cultural differences, and if we look at how culture has changed over the last 50 years, the theme that keeps coming up is individualism,” Twenge says. “The upside to that is this generation has more tolerance for people, regardless of background. But what you can also get are unrealistic expectations and overly positive self views.”

RELATED: Generation Cry: Why I Can (Kinda-Sorta) Defend Gen Y

Where They Are Generation Y is dealing with a hard dose of economic reality, to say the least. Despite being the most educated generation in history, student loan and credit card debt is widespread among them.

Four out of 10 Millennials in one Wells Fargo study said they felt “overwhelmed” by their debt, with college debt being their top money concern. Meanwhile, a TIAA-CREF survey revealed that nearly half of all Gen Y credit card holders carried balances on their credit cards. As a result of their squeezed finances, they are worried about meeting their day-to-day bills and expenses.

“This is a hungry generation driven by purpose. More than remuneration through a hefty salary, they want to make a difference.”

At the root of a lot of their money troubles is the difficulty they’ve had landing jobs. Some 40% of unemployed workers are Gen Yers, according to a Georgetown University analysis of census data, and job creation has yet to work in their favor.

And those numbers underestimate what’s really going on, says Dan Schawbel, founder of consulting firm Millennial Branding and author of Promote Yourself: The New Rules for Career Success. “A lot of Gen Y has dropped out of the workforce, and their underemployment, working as waiters or in retail, isn’t accounted for,” Schawbel explains.

As a result, delayed career starts are making this the “failure to launch” generation because its members are delaying buying homes, having children and even getting married. “It’s hard to date, much less marry, when you’re living in your parent’s basement,” Sladek says.

Stretched financially to meet their regular expenses, Millennials have no monthly savings plan, show little interest in retirement planning, and have even been reducing contributions to their employer sponsored retirement plans, one Ameriprise study found. And thanks to a fear of losing what they’ve accumulated, they’re more likely than other age groups to choose cash as their favorite long-term investment.

Where They’re Going While their careers and earning potential have been delayed in the short-term, many experts say companies should get ready for Millennials to dominate the workforce. In fact, Schawbel estimates that, by next year, members of this generation will account for the largest percentage of the U.S. workforce, transforming the economy through their entrepreneurial talents and tech expertise.

But unlike their predecessors, Millennials are unlikely to have much company loyalty. “They’re looking for more flexibility, work-life balance and having a more personal impact," Twenge says. "But a lot of employers—especially big corporations—aren’t ready to accommodate those preferences from a cultural standpoint.”

The one benefit they do have, however, is entering the workforce at a higher salary. Millennial college grads are earning slightly more than Gen Xers did at the same age—a median of $45,000 in 2012, compared with an inflation-adjusted $43,663 in 1995.

Patrick O’Shaughnessy, a Gen Y portfolio manager at O’Shaughnessy Asset Management and author of Millennial Money: How Young Investors Can Build a Fortune, is optimistic about Millennials’ futures.

Yes, they have obstacles to overcome, but he believes it’s something their idealism and ambition can help them power through. “This is a hungry generation driven by purpose, who want their jobs and lives to be in pursuit of things they value and find meaningful,” O’Shaughnessy says. “More than remuneration through a hefty salary, they want to make a difference.”

RELATED: How Unemployed Millennials Affect Everyone’s Finances

The Money Mindset of Generation Z

Generation Z, the demographic of 23 million individuals born roughly in 1995 and later, has been curiously dubbed the Homeland Generation—perhaps because they grew up in an era of increased security.

Regardless of the reason, it could be an apt term for a generation overprotected by their helicopter parents and saddled with fears about their financial futures.

Where They’ve Been Research shows members of Gen Z view themselves as creative, open-minded, intelligent and innovative, reflecting the fact that their lives have been shaped by even higher levels of technology than Millennials have.

They are the first generation to grow up being connected to a cyber cloud of friends, data, news and entertainment. As such, they are hyper aware not only of local trends but also global ones, staying up to date on the economy, wars, the energy crisis and climate change across the world.

They’ve also seen their parents and grandparents deal with economic volatility, so it’s no wonder that 82% of more than 165,000 Gen Z college freshmen surveyed last year rated “becoming very well off financially” as their top life goal.

That’s compared to 42% of college freshman in 1966—which could reflect the unrealistic expectations about money that each generation has progressively had since the Baby Boomers, Twenge says.

Even so, younger Generation Z members have the ambition to meet that goal, seeing education as the way to get there: 60% of respondents to TD Ameritrade’s latest survey of Gen Z sentiment said a college degree is very important to their future financial success, and half expect to attain an advanced degree.

RELATED: 5 Real Teens Reveal: How I’m Planning to Pay for College

Where They Are Even if they do end up mirroring the unrealistic Millennial mindset over career and money, they seem to be getting schooled—financially, at least—by their parents. In the same TD Ameritrade study, 51% of Gen Zers said their parents were their chief source for learning about finances, and 84% said they’d been told about the importance of saving.

A survey of Gen Z teens found they yearned to own a home—and more than half would give up social media for a year (gasp!) if it guaranteed they’d be able to buy a house.

And those lessons seem to be sticking: Nearly a majority—90%—said if they were handed $500, they would save at least some of it, and over one third said they followed a budget.

Gen Zers have the same realistic concerns about unemployment and tackling student loan debt as their Gen Y predecessors, but don’t want to follow the same Boomerang path: Unlike Gen Y, members of this generation said they would be “embarrassed” to still be living at home with their parents as adults.

Where They’re Going To Schawbel’s mind, Gen Z has an advantage over Gen Y. “They appear to be more realistic instead of optimistic, and are likely to be more career-minded, quick to adapt to new technology and to work more effectively,” he says. “They’re coming to the workplace better prepared, less entitled and more equipped to succeed.”

Also in Generation Z’s favor is the fact that they are open to change because they’ve been constantly in the midst of it, says Twenge—a good thing given the financial uncertainties ahead. “It’s hard to predict where we’re headed, but due to economic difficulties, the outcome may be smaller families and houses [for them],” she says.

All the same, Gen Zers seem to have traditional expectations for the American dream. In fact, a real estate survey of Gen Z teens found they yearned to own a home—and more than half would give up social media for a year (gasp!) and do double homework if it guaranteed they’d be able to buy a house in the future.

For most of Gen Z, it’s too early for them to invest on their own, but the TD Ameritrade survey found that, on average, they thought the right age to start saving for retirement was 27. But only 17% believed investing in the stock market was the best way to build a nest egg, with 47% ranking a savings account as a better vehicle—pointing to an education gap that needs to be filled in by parents, financial professionals and future employers.

“What our research shows is it’s never too early to start having discussions with your children about money,” says Nicole Sherrod, managing director at TD Ameritrade. “We need to emphasize there’s such a wealth of resources out there to learn more personal finance, since so little is being taught in the classroom.”

RELATED: Take Shelter: Why Gen Z Has Homebuying on the Brain

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