15 Reasons Why Gen Xers Are Smarter With Their Money Than Millennials
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Sandwiched between two-large generations, baby boomers and millennials, generation X (also known as gen X) is often considered the “neglected middle child.”
But, that doesn’t mean that gen Xers should be completely neglected. After all, they’re 65 million strong and are expected to surpass the Boomers in population by 2028.
So, let’s take the spotlight these three generations:
- Baby boomer is a term referring to a person who was born between 1946 and 1964.
- Gen X is a term referring to a person who was born between 1965 to 1983.
- Millennial is a term referring to a person who was born between 1984 to 2004.
Gen Xers were once considered slackers. Now, they are between the ages 34 and 54. This generation faces their own set of personal, career and economic circumstances. Many of them experienced the Great Recession. As a result, they have had a difficult time managing their money. However, that’s a problem for all generations -- from boomers to gen X to millennials.
Despite having a higher median income than millennials, gen Xers are struggling with their money. Between juggling their own finances like student loans and mortgages, this generation is also supporting their children and parents.
Along with their cynicism, this has actually helped gen X make smarter money decisions versus their younger generational counterparts for the following 15 reasons.
1. They don’t think short-term.
When Financial Finesse, a financial education company that specializes in workplace programs, compared the financial fitness of boomers, gen Xers and millennials, it wasn’t surprising that the youngest of the three generations had the lowest overall financial-wellness score. Obviously their age and median income play a role, but the report found that Millennials are more “focused on short-term financial goals, including managing cash and getting out of debt.”
While it’s admirable that they want to eliminate debt, retirement planning “is the lowest among their self-selected priorities.”
“Millennials are oblivious to the $14 trillion retirement crisis facing America,” says Personal Capital CEO Bill Harris. “They’re dangerously assuming that retirement planning can start tomorrow, instead of today. We’ve found that millennials are banking on working just 15 years, and many plan to live on inheritances during retirement -- it’s delusional. But there’s hope if we meet Millennials where they are now, whether that be battling student loan debt or searching for easier tech-driven solutions.”
While gen X may not be perfect when it comes to focusing on the long-term, they tend to have a more realistic view of retirement -- even if it’s pessimistic. However, 76 percent of gen Xers started saving for retirement in their twenties. And, today, eight out of 10 are actively contributing to a 401(k), while seven out of 10 are socking money away in an IRA.
2. A boom in wealth.
According to a report released by Deloitte, generation X will experience the highest increase in share of national wealth over the next 15 years, “growing from under 14 percent of total net wealth in 2015 to nearly 31 percent by 2030.”
While we can’t predict what they’ll do with this excess money, gen Xers “are entering the most financially rewarding stages of their lives,” which means they’re “the next big fee pool for financial services firms.” If taken advantage of, generation X may finally get themselves on the right track financially.
3. They’re financial survivors.
Generation X carries the most credit card debt. However, they’re using their credit cards for exotic trips or luxury items that they can’t afford. They use credit cards as a survival tool. “They tend to be practical, trying to raise families or do things for their kids, and so they have to rely from time to time on credit cards,” says Ann Fishman, generational expert and author of Marketing to the Millennial Woman.
Even though they struggle with debt, gen Xers are savvy and keep tabs on the best ways to find deals. They’re willing to make sacrifices when needed, which makes them financial survivors.
4. Maximizing retirement savings.
While the Great Recession hit gen Xers hard, they’re also “the first generation to have access to 401(k)s for most of their working careers, and they highly value them as an important benefit, have high plan participation rates and, for better or worse, some have take loans and early withdrawals,” reports the Transamerica Center for Retirement Studies.
“For members of generation X, a rite of passage that went with getting your first job was getting our first 401(k) package and enrolling in it,” says Marcy Keckler, vice president of financial advice strategy for Ameriprise.
“They realize that saving for retirement is largely their own responsibility; neither their employer (through a pension) nor the government (with Social Security) is going to take care of it for them,” she said.
And, despite the fact they they’re are behind on their savings, they still have time to catch up.
Millennials, on the other hand, “expect their primary source of income in retirement to be self-funded through retirement accounts (e.g., 401(k)s, 403(b)s, IRS) or other savings and investments.”
5. They have a pragmatic outlook.
“Many members of Generation X notoriously grew up as ‘latch key’ kids and developed a strong sense of self-reliance, a pragmatic outlook and a cynical suspicion of authority. They prefer to do their own research online before speaking with a professional and to choose from among options rather than being told what to do,” claims the Financial Finesse report.
In other words, Gen Xers have grown up to not only be self-reliant and independent, but also look and deal with problems sensibly and realistically so that they can effectively weigh the risks and rewards of their actions. If they make the wrong financial decisions, for example, they’ll accept the responsibility, live with it and look for ways to dig themselves out the hole.
6. Building home equity.
Despite the impact of the Great Recession, it still shouldn’t be surprising that home ownership is higher for gen Xers than millennials. What is interesting, is that this generation is realizing that a home is more than just a place to live, it’s a financial asset.
By, again, focusing on the long-term, gen X homeowners realize the importance of maintaining their homes so that they can sell them down the road. And, considering that home prices are appreciating at more than twice the rate of inflation and wage growth, those who purchase homes could give their finances a major boost through accruing equity.
7. They’re going to keep working.
“They expect to redefine retirement,” says Marcy Keckler, a CFP® and VP of financial advice strategy at Ameriprise. “They don’t have an on/off switch from working -- instead, they anticipate a gradual evolution into a different kind of job.”
According to an Ameriprise survey 73 percent of gen Xers plan to pick up part-time, seasonal or consulting work in retirement in order to pay their bills and stay active mentally and physically.
8. Realize the importance of a saving fund.
Gen Xers experienced firsthand the impact of the Great Recession. As a result, they’ve made it a priority to set aside money into an emergency fund.
The Financial Finesse report found that 50 percent of gen Xers have an emergency fund, compared to just 47 percent of millennials.
9. Less likely to withdraw money with a penalty.
Even though Gen Xers struggle with money management, they’re improved awareness of retirement and investing could have lead them to be more cautious if they are forced to withdraw any money from their savings. “Since 2010, this generation is less likely to withdraw money with a penalty from their retirement accounts,” says Anum Yoon, founder of Current Currency.
10. They’re entrepreneurs.
Did you know that more than half (55 percent) of startup founders are members of generation X?
In a way, that shouldn’t be all that shocking. After all, gen Xers are self-reliant. They want the ultimate job security after experiencing a turbulent economy. While millennials strive for work that they’re passionate about, gen Xers actually know how to succeed doing something that they love.
11. Make informed financial decisions.
One of the strongest traits is that gen Xers do their homework before making any serious decisions. In fact, the Financial Finesse report, found that “generation X was the one generation to improve in the percentage knowing they’re on track for retirement (20 percent to 22 percent) and feeling confident in their investment allocation (38 percent to 39 percent).”
In other words, before taking advice or recommendations blindly, they’ll do some investigating so that they can make more informed financial decisions, such as how to avoid fees and how investments fit into their overall financial plans.
12. The don’t have a “Keeping up with the Jones’s” mentality.
“Individualistic, undersocialized Xers never subscribed to the ‘Keeping Up With the Joneses’ mentality,” writes Neil Howe in Forbes. “Even when they do care about what others think, they prefer to appear thrifty, rather than flashy. Today’s most influential young entrepreneurs, like Twitter’s Jack Dorsey, show they’ve made it without donning Tom Ford suits.”
In other words, they’re not going to purchase a new car because their neighbors did. They’re don’t dine at an expensive restaurant because it’s on their Facebook newsfeed. They make their own decisions rather than be peer-pressured into reckless spending.
13. Utilize college savings plans.
To be fair, Millennials aren’t parents just yet -- and they’re still paying off their student loan. But, the fact that gen Xers are utilizing college savings plans, such as 529 plans, in order to pay for their children’s college funding, is another example of how they’re more realistic, long-term thinkers when it comes to money.
14. When they splurge, it’s practical.
If Xers do splurge, it’s at places like Home Depot or Pottery Barn. They can make home improvements. As discussed earlier, putting money into their homes will help build equity. But, it also can reduce their monthly bills. For example, gen Xers are the biggest investors in connected devices like Nest thermostats.
It’s a practical investment that can reduce those expensive monthly energy costs.
15. They’re savvy, skeptical, and self-reliant.
If there’s one main takeaway here, it’s that gen Xers are savvy, skeptical, and self-reliant. As Phil Taylor executive vice president for special projects at the Pew Research Center, adds, “they’re not into preening or pampering, and they just might not give much of a hoot what others think of them.”
Millennials had protective parents. However, generation X learned to be independent, make their own decisions, and hold themselves responsible. That’s why they do their research before taking any sort of advice from anyone. If it seems legit, they’ll accept the recommendations. And, if it backfires, then they find a way to fix it.