Whether a Boomer, X-er or Millenial, every generation has its own quirks when it comes to spending decisions and saving for retirement.
“While every person makes decisions based on what makes the most sense from their vantage point – specifically how to maximize gains and minimize losses – what seems reasonable to some individuals may not be reasonable to others,” says Dr. Morton Bruce, department of psychology, Western University Canada in London, Ont.
“This decision-making process is influenced by the generation to which we belong and the corresponding cultural and economic factors that make the future appear differently to us.”
Understanding why a client of a certain generation is making a particular decision can be helpful to advisors. Here are some of the major motivations behind the decisions of each generation:
Millennials (1982 – 1999):
According to the recently released TD Canada Trust RSP Poll, 65% of Millennials feel they are always spending too much money, compared to 56% of Generation X and 45% of Boomers. This sense of insecurity is rooted in the constant global economic in which Millenials have grown up in.
“Faced with job market challenges and an uncertain economy,” says Morton, “Millennials may find it difficult to envision a concrete future, making saving for the long-term seem less reasonable.”
Generation X (1965 – 1981):
The survey results show that everyday responsibilities from mortgage payments to paying down credit card debts have left many Gen X Canadians feeling that they simply can’t save enough for retirement. However, Morton points out that it’s also the history of Gen X that is undermining the resolve of some people to save more for the future.
“Gen X individuals grew up during a period of unprecedented economic transformation marked by greater fluidity in the job market and the elimination of mandatory retirement. These larger economic forces have led to a shift away from traditional notions of career and retirement,” says Morton. “As a result, many Gen X-ers anticipate working well into traditional retirement years, undermining the incentive to save for the long-term.”
Baby Boomers (1946 – 1964):
While 79% of Boomers who were surveyed feel they have their finances well in hand, many have some lingering doubts as to whether they’ve actually saved enough for retirement.
The fear of being unprepared, says Morton, stems in large part from Boomers’ memories of economic good times and parents who were prepared for every situation.
“As part of the post-war generation, Boomers were not only influenced by parents who survived the Great Depression,” says Morton, “but many have also enjoyed economic affluence and employment stability throughout their career, making saving for both the short and long-term appear sensible.”