Money Matters: Financial Habits and Behaviours Across Generations

Money matters are a dynamic journey, influenced by cultural shifts, technological advancements, and economic cycles. Let's delve into the financial habits of four distinct generations – Boomers, Gen X, Millennials, and the emerging force of Gen Z. From traditional savings to digital investments, each generation shapes and reshapes the financial world in its own way.

Boomers: The Stewards of Saving

Born between 1946-1964, Boomers witnessed a world transitioning from post-independence recovery to economic prosperity. Their upbringing in a culture that prioritized savings laid the foundation for a conservative and cautious financial approach. Boomers' saving habits have left a lasting impact on the economy and next generations.

Gen X: Balancing Act in Changing Times

Generation X, born between the 1965-1979, faced a shifting economic landscape and technological advancements.  Through highs and lows, scandals and recession, this generation’s financial habits are all aligned in the backdrop of the 90s – economic liberalisation, kargil war, evolution of India’s share market and scams.

Millennials: Embracing Change with Open Arms

Millennials, born between 1981-1996, entered a world drastically different from their predecessors. The advent of technology, the rise of the internet, and a shift towards individualism defined their formative years. Millennials are driven by instant gratification and are experience-seeking, having redefined spending, investing, and borrowing norms completely.

Gen Z: The Trailblazers of Tech-Savvy Finance

Born after 1997, Gen Z represents the new frontier in financial landscapes. Having witnessed the challenges faced by their parents, Gen Z is approaching money matters with a proactive mindset. With a strong inclination towards technology, thi generation is setting trends in digital investments, early savings, and an optimistic outlook on the financial future.

3 pillars of finance- Savings, investments and Borrowings: Our organization conducted a survey to analyse these four generations. We aimed to gain insights into their mindsets regarding savings, investments, and borrowing habits.

Savings Trends: Boomers to Millennials

Examining the trajectory of saving habits unveils a distinct evolution across generations. The Boomers, characterized by a disciplined saving ethos, stand in contrast to Generation X, which navigates a delicate balancing act amidst shifting economic landscapes. While almost 70% of the Boomer generation is retired, we can still see from our survey that more than 75% of the retired Boomer generation is saving more than 30% of their passive/pension income. This strongly reflects the right investments made by this generation for their retirement needs, additionally a strong case for the correct attitude toward savings and simpler lifestyle expenses.

Gen X is surely a divided lot, with very few members being able to save 30-50% of their income. The range of 30-50% would be ideal for this “sandwich” generation, which will be taking care of its kids and parents simultaneously. A great divide is seen in them, clearing depicting the income disparity, with skewed results of below 30% or above 50%.

Millennials, the so-called privileged generation shows divided results in the savings domain.  It is surprising that this generation which boasts about the maximum highly educated individuals, start- up founders, 2nd generation business owners, managing to save only 10-30% of their income. The spends on travel, online shopping and lifestyle upgrades is maximum seen in this generation too.  Meanwhile, for Gen Z, 80% people manage to save below 30% of their income. Gen Z is still evolving with the employed members being in their mid-twenties and are focused towards, education, making ends meet and paying off education loans.

As we delve deeper into the evolving landscape of financial prudence, it becomes evident that each generation's approach to savings is shaped by a combination of external factors, cultural influences, and technological advancements, weaving a complex tapestry of financial attitudes across the ages.

Investment Strategies: Then and Now

As we can see mutual funds is the most popular choice of all 4 generations. Gen X surprisingly is the least number compared to peers in mutual funds whereas it is leading the board in fixed deposits. The portions of Gen X’s holdings in Stocks, Mutual Fund and Fixed Deposits yet again highlight the income disparity of this generation especially with 2 different schools of thoughts and risk appetites. Meanwhile Gen Z seems to have huge exposures to Stocks amongst all the 4 generations, indicating that Gen Z is developing high risk tolerance, with a desire for accelerated growth.

Investments in real estate has a predictable pattern, with the senior most generation holding the maximum share, as it will take significant amount of time for the younger generations to increase their stakes in this illiquid and expensive asset class. On the other hand, highest proportion of PPS, NPS being held by Millennials probably reflects the contributions made by members in service sector of this generation.

It is interesting to note the gap between bonds and Bank FDs. Investors of FDs will get better returns by investing in bonds, yet the popularity of FDs highlights the lack of knowledge of bonds or the mere lack of will, to make the swap. The tradition and convenience of bank FDs continue to dominate Gen X and Z, which otherwise as generations have contradictory views on most matters of money.

Borrowing: A Generational Evolution

Boomers, known for their cautious approach, often borrow judiciously when it comes to homes, emphasizing stability in real estate. Generation X, having experienced the evolution of financial tools, displays a more versatile attitude towards borrowing, like acceptance of credit cards. Millennials, in their early credit journeys, often take on loans for education and gadgets, blending practicality with technological indulgence. Meanwhile, Generation Z actively engages with digital lending services, showcasing a proactive approach to managing their finances in the digital age, also the biggest target audience for BNPL schemes(Buy now pay later). This examination of borrowing habits across generations provides a snapshot of how attitudes towards debt and financial tools have shifted over time, reflecting both economic changes and technological advancements.

According to our survey findings, maximum millennials are servicing their debt via EMIs and other options. Followed by Gen X, Gen Z and Boomers. Gen Z will continue to borrow more, surpassing Millennials’ loans in the coming 2 decades as they grow into their professions and seek debt for homes, education and other needs. Gen X will be able to complete their obligations as they move closer to retirement.

Conclusion

This exploration not only provides a snapshot of the diverse financial behaviours across generations but also serves as a compass for understanding the broader societal shifts that mould these habits.  Unravelling the threads of commonality amidst the differences, we recognize that certain values transcend time, connecting Boomers to Gen Z in a shared quest for financial security and prosperity. By embracing the lessons embedded in these generational stories, we stand better equipped to anticipate future shifts and adapt to the ever-changing landscape of personal finance in this digital age. In essence, this exploration is not just a retrospective gaze; it's a forward-looking guide, offering a lens through which we can discern the patterns that will shape the financial habits of generations yet to come.