While different generations have similar vulnerabilities and priorities, members of Generation X are generally worse off than millennials and both late and early boomers, says a recent generational research study published by financial education group Financial Finesse Inc.
For Gen Xers, who are between 30 and 44 years old, part of the problem is just bad luck. Many members of Gen X started working and saving too late to take advantage of the booming market, and bought houses just in time to get hit by the housing crash, according to the Financial Finesse study released on Dec. 6.
Boomers, on the other hand, had enough time to build a cushion and grow equity to protect themselves, while younger millennials have enough time to grow their assets as they’re just starting out.
Generation X Has Cash Flow Issues
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Financial Finesse found Gen X to be the least financially stable. They are less likely than millennials or boomers to have a handle on cash flow or maintain an emergency cash fund. Less than half regularly pay off credit card debt in full, and just over half are comfortable with their debt level. They also scored the lowest on Financial Finesse’s wellness score, with a score of 4.6.
A quarter of respondents between ages 30 and 44 have an annual income of between $35,000 and $60,000, and 22% make between $100,000 and $150,000. Most respondents in this age group are married with children under 18, and 67% own their home.
“Part of it is due to life cycle,” Erik Carter, resident financial planner at Financial Finesse and a member of the firm’s Think Tank, told AdvisorOne on Thursday. “They’re at an age where they have a mortgage and children — we’ve seen a big correlation between children and financial stress.”
Timing is another factor in Gen X’s relative financial straits. “They missed the run-up in stocks,” Carter said, “and the last 10 to 12 years in general have not been good.”
Similarly, the housing crash hit Gen X harder than other age groups, the report pointed out. They were more likely to own homes than millennials, but less likely to have the same level of equity that boomers did. They are also more likely to have young children than any other age group, which contributes to their financial stress.
Gen X is recovering from the recession, but they’re still behind, Carter said. He referred to data from the Pew Research Center that found 35- to 44-year-olds are 44% poorer than their older counterparts were at that age.
“Their hardest problem is managing cash flow and balancing competing priorities,” he said.
Many of the same tech tools used by millennials could help members of Gen X focus on tracking expenses and setting budgets, he added.
On the positive side, Gen X is more focused on retirement than younger adults. Financial Finesse found 65% of respondents say retirement planning is their top priority. This may come from a general sense of caution shared by the generation. The report cited Greg Hammill, former director of intern and student programs at Fairleigh Dickinson University’s Silberman College of Business, who wrote in an article for FDU Magazine that members of Gen X tend to be conservative when it comes to finances.
Debt, it seems, is what’s holding Gen X back, more than an inability to save or a misalignment of priorities. Nearly 90% of Gen X workers are saving in their employer’s plan, and three-quarters are using their company match. Twenty-two percent contribute to an IRA, less than the number of millennials who do so. However, as mentioned before, almost half are uncomfortable with their level of debt.
Millennials Have Time and Technology
Naturally, millennials have the lowest median income, but Financial Finesse found that investors in their 20s have a better grasp of money management than many of their older counterparts. Twenty-eight percent are making between $35,000 and $60,000 a year, and nearly three-quarters say they have a handle on cash flow while 88% are paying their bills on time every month.
Over half of millennials surveyed said getting out of debt is one of their top priorities and 62% are working toward that end by paying off their credit card balance in full regularly.
Time is on millennials’ side, but technology is an important part of their story as well. Financial Finesse noted the impact of coupon sites like LivingSocial and Groupon on millennials’ budgets. Technology has had a subtle impact on their retirement plans as well. Half of millenials have been automatically enrolled into their company retirement plan and almost the same percentage are entirely in a target date fund.
There’s a dark stain on this rosy picture, however. On a scale of one to 10, Financial Finesse gave millennials a score of only 4.9 for financial wellness, taking into account age and income for a particular generation. A score between 3 and 4.9 indicates a need for more basic information.