The Surprising Generation that Has a Handle On Its Finances

Smiling young woman holding piggy bank We all know that we should be saving more and spending less, but we don't always follow that wise advice. What may surprise you, though, are the varied ways people in different age groups have responded to the financial crisis. Some have been more responsible, some less so, and you might not guess at first which generation is which.

Financial Finesse, a provider of workplace financial wellness programs, recently released its annual report on financial issues and the generations. The 2012 Generational Research report separated respondents by generation:
  • Millennials: Under 30
  • Generation Xers: Ages 30 to 44
  • Late Baby Boomers: Age 45 to 54
  • Early Baby Boomers: Age 55 to 64
Here are some of the report's findings:

Which generation is the least likely to have an emergency fund?
While only 50 percent of millennials have an emergency fund, Gen Xers are doing even worse: Just 42 percent of them do.

Which generation is worst at managing its credit card debt?
We've gotta hand it to kids these days. More than 60 percent of millennials pay off their credit card balances in full. Late baby boomers, it's no surprise, are good at handling their debt, too, with 65 percent of older boomers zeroing out their card debt regularly, too. However, only 47 percent of Gen Xers pay off their credit cards each month.

Which generation is best at managing its cash flow?
Seventy-nine percent of older boomers say they have a handle on their cash flow and spend less than they make each month, but so do 73 percent of millennials, even though they generally have the lowest income among the generations. Here again, Gen Xers are having a tough time, with only 61 percent saying they spend less than they make.

Which age group claims to be the most ready for retirement?
None of them, really. Even among the early boomers who are on the cusp of retirement, only 25 percent know they are on target to replace at least 80 percent of their income in retirement. Even worse, though, are the numbers for the late boomers (18 percent), Gen Xers (15 percent) and millennials (17 percent). Interesting that respondents age 45 to 54 are only slightly better prepared than people who are under 30.

Which generation of parents is better prepared for college expenses?
You might think the days of paying for college are behind them, but 11 percent of respondents age 55 to 64 have minor children. And 41 percent of the people in this age group responded that they know how much they need to save for their kids' college, and that they're on track to meet that need. Unfortunately the Gen Xers, 65 percent of whom have minor children, are the worst prepared, with only 14 percent saying they are on track to pay for college.

Is anyone prepared for a nursing home stay?
Not really. While not necessary yet for the millennials or the Gen Xers, very few of the late or even early boomers have a long-term care insurance policy. Just 16 percent of the early boomers and only 10 percent of the late boomers have one, but Financial Finesse reports that the 2012 MetLife Market Survey of Long-Term Care Costs says the average cost of a private room in a nursing home is $90,520 per year.

In general, the survey shows that Gen Xers are having the hardest time juggling their debt and financial planning issues. Even though millennials are the lowest income generation, they seem to be handling their finances better and avoiding debt.

Michele Lerner is a contributing writer for The Motley Fool.

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Ummm... Maybe this is because Gen-Xers are still having kids and buying houses while the Millennials are still living at home and the Boomers have (hopefully) paid off their homes and made it to the top of the pay scale? If the Boomers would start retiring like they should then Gen-X might have a chance to move up a notch in the work ladders.

December 13 2012 at 12:30 PM Report abuse rate up rate down Reply
mary & ron

create a savings $$ set aside early

December 12 2012 at 7:45 PM Report abuse rate up rate down Reply
Oleander Five

I am 27, married to a 30 year old. I think one reason the gen-x generation has money issues is the way they were raised. It effects them more so than the Millennials (although those of us who just missed gen-x by a few years are also probably effected by this) because they were learning and developing their relationship with money during the credit boom of the 80's & 90's. People could get approved for so many credit cards and this changed the way people lived. I remember my parents having stacks of credit cards, at least 30. Of course, that ended up with divorce and bankruptcy in the early 2000's, but for many of the gen-x crowd, they were long gone and on their own before their parents chickens came home to roost.

The way we as Americans handled money changed in those years and it gave young people a different view on money. Also during the 90's - about 2007 was the period with the significant push to go to college- at all costs- get a 4 year degree, get a masters, take out student loans. Now we see the problems with that- way too many people with significant student loan debt and minimum wage jobs that have nothing to do with their degrees.

I do think that *some* people are starting to learn how to handle money better. The age of "if you want it- just charge it!" and "you can afford it if someone will finance it for you!" is over. Millennials have learned that they cannot handle money like the generation before them because they see how it ends. Not to mention credit is no where near as easy to get now days. Many were raised by parents who struggled with debt and saw first hand how devastating it was to be making $40k a year and have $200k in credit card debt.

It really is a sad situation though. The entire attitude in this country has changed. Whereas people like my 94 year old grandfather worked from age 12 to mid 70's, successfully retiring from two different companies and saving along the way to provide for himself, people now days expect the providing to be done by the government and that they really don't need to worry about the future. Way too many people have no motivation to work. And no, I don't mean those unemployed who are seeking work- I mean those who are happily unemployed, living with their parents in their late 20's or early 30's, leaching off the government, etc. Entitlement in this country has gotten out of control and there seems to be no end in site.

As bad as things are now- I can only imagine what this country will look like in 40 years when all of the baby boomers are gone and we are left with my generation and those that follow to support the ever growing number of people who seem to expect it to all be provided for them.

December 12 2012 at 12:43 PM Report abuse +2 rate up rate down Reply
Edmond S. Abrain

Not worth worrying about. Obama will look after all of them.

December 12 2012 at 10:37 AM Report abuse +1 rate up rate down Reply

Until I finally gave in to the fact I had to put part of my income aside for an "emergency" fund, I lived life the way my children do now. It's tough but it's the only way to live without being scared to death of a family emergency or other financial calamity. I didn't accept this until age 55 or so, so I am far from being perfect. Until then, I had to hit the credit cards or worse, a finance company for every ripple in my income. I worked as a construction electrician, so there were plenty of ripples. I wish my children, and all struggling workers well as they come to accept the inevitable solution - save 10% or more of your income if you ever want indepencence.

December 12 2012 at 9:45 AM Report abuse +1 rate up rate down Reply

"Even though millennials are the lowest income generation, they seem to be handling their finances better and avoiding debt."

What nonsense. A good portion (not all) of the under 30 crowd is living off their parents' largess. They have no living expenses, medical expenses, etc. This skews the results dramatically. Of course they can 'avoid debt'.

December 12 2012 at 7:53 AM Report abuse +3 rate up rate down Reply