The world’s technological, political and economic evolution is well represented in the substantial contrast between generations today. Formally known as Generation X (people born in the 1960s and 1970s) and Generation Y or Millennials, (those born in the 1980s and 1990s), the two groups of people categorically could not differ more. Both generations have witnessed pivotal, extreme historical events that individually shaped the two groups, as well as key political shifts, economic downturns and successes and changing societal values. Today, these two generations make up an estimated 150 million people in the world. Simply taking into account the core values of the two generations, it is clear their personal finance habits and beliefs would clash immensely, and could greatly impact the world’s future economic and financial success.

Generation X: Core Values

Adults born in the sixties and seventies have been labeled as members of the Nomad Generation or the “Lost Generation”, according to Strauss and Howe, two generational biographers. They have been categorized as showing great disdain for everything that dominated the previous decades, from politics to music and fashion trends. As individuals, they are known for being cynical and defiant, yet pragmatic and education-oriented. This was the first generation of “latchkey kids”, as their parents (often both the mother and father) became more career driven. Those growing up in the sixties and seventies were also inevitably influenced by the energy crisis, the end of the Cold War, the Watergate Scandal, downsizing and the economic crisis at the time. Many of their perceptions have been shaped by a world filled with lying, deceit and dissatisfaction. Kids growing up during this time often had to take care of themselves at an early age and watch the adults in their lives experience layoffs and a rising divorce rate. Even today, this generation is still the best educated cohort, with 29% of people across the world earning a bachelor’s degree or higher, 6% higher than the generation that preceded them. According to a study done by Ernst & Young, Generation X is more entrepreneurial than the Baby Boomers and they possess traits of adaptability, problem solving and collaboration. In regards to their work ethic, members of this generation highly value balance. They prioritize productivity, structure and direction, and fast results. Generally this cohort is self-reliant, skeptical of authority figures and project-oriented. After growing up with Baby Boomer parents, (typically workaholics), they mainly focus on an equal balance between work and family rather than advancement in their career. In the same EY study, Generation X scored lower than all other generations in relation to displaying executive presence and being cost effective. Overall, their sensible, logical and slightly cynical attitudes are reflected in Generation X’s cautious monetary trends.

Generation Y: Core Values

Strauss and Howe have labeled this generation the “Hero Generation”, though they are commonly referred to as “Millennials”. More critically, some generational historians refer to this group as the “Peter Pan Generation”, as they are characterized by easy childhoods and delayed adulthood. Millennials today are known for their optimism, realism and high morals. They tend to be more tolerant and attracted to spirituality. Along with those traits, they often have a great sense of civic duty and higher “street smarts”. Generation Y grew up in a child-focused world, living in a more sheltered environment than any cohort that came before. They typically grew up as children of divorce, were kept busy as children and are known as the first generation of kids to have a schedule. As birth control became more available to Generation X, kids in this generation were normally wanted, deeply nurtured and even coddled. Though they often present an overall positive attitude towards life, this generation has witnessed and been victims of terror attacks, school shootings, an AIDS epidemic and uneasy relations across countries in the world. In regards to business and finance, millennials have grown up in a period of economic expansion. One of the largest influencers in the lives of millennials is absolutely the digital media and technology boom. In the Ernst & Young generational study, millennials were found to be the most tech savvy group in history, often relying on technology and social media to leverage job opportunities. The technology craze has allowed many Generation Y members to evolve as a more racially and ethnically diverse group, as well as an accepting group. They are characteristically flexible, achievement focused and confident. The term “Hero Generation” is related to their deep-seated idealism and desire to save the world. Millennials often work towards solutions and positive change rather than simply finishing a job, and they highly value multitasking and entrepreneurial opportunities. Not only do they prioritize a work/life balance, but also a balance with community involvement and self-development. Though millennials tend to work towards promotions more often than Generation X or the Baby Boomers, they often rely on technology too much in order to get the job done, have poor team building skills and are the least hardworking cohort (EY, 2013). Millennials’ optimistic attitude greatly influences their spending habits, entrepreneurship patterns and overall personal finance trends.

Generation X: Personal Finance Customs

As a product of the Baby Boomer’s “work is life” mentality, Generation X often rebelled against this theory, seeking out the work/life balance rather than solely worrying about working as much as possible. Aside from prioritizing this balance, Generation X differs from its previous cohorts in that they worry specifically about running out of money in retirement. Baby Boomers often worked to retire as soon as they could, whereas Generation X strives to have enough money throughout their retirement. As people are living longer and longer, retiring as early as possible while still maintaining one’s lifestyle is a necessity. Generation X was hit hard by the Great Recession, therefore many people born in the sixties and seventies highly value 401k plans and have greater participation in retirement savings than any other generation. However, more Generation X members are resulting to withdrawing money from their retirement funds than previous generations.

According to a survey done by Invest Trust Management, 25% of people in this generation are concerned about meeting monthly expenses, and 44% of them find it difficult to meet household expenses on time each month. After major economic ups and downs, Generation X has firsthand experience of the importance of an emergency fund. In the same study, over 50% of people in this generation consistently set aside money for times of crisis.

Generation X, as a relatively self-reliant group, has high entrepreneurial aspirations. Over half of startup companies today are founded by this generation. Financial advisor David MeInyk stated that “Generation Xers believe the ultimate job security is to work for yourself” (MeInyk, 2016). This generation’s trend towards distrust in authority and doubt in public figures led to a highly entrepreneurial phase in America’s history.

Not unlike their attitude towards business, Generation X takes a hands-on approach to investing. They often do their own research on investment options and are more concerned with avoiding fees in order to preserve their earnings. They are less willing to accept investment recommendations until they have done their own general investment research. Characteristically, people in this generation only invest when they are completely confident, have assessed their risk tolerance and are able to balance their investment accounts often.

The 2008 Housing Crisis in America affected Generation X the most, and many are still recovering from losses during that time. Yet, Generation X’s homeownership is still significantly high when compared to other generations. According to the Census Bureau data from 2015, 58% of Generation X (aged 35 to 44) owned a home, whereas only 34.8% of Millennials (aged 28-35) participated in homeownership. When surveyed, John Bodrozic stated that “Generation X realizes that their home is not only a place to live but a financial and physical asset” (Bodrozic, 2015). Although it could be argued this gap is solely due to Millennials’ younger age, a much higher percent of Generation Xers owned a home between the ages 28 and 35 than Millennials do now.

Today, Generation X spends more money than any other generation living currently, and holds the purchasing power in the world today. They spend more money on food (both dining out and at home) than any other generation, are often swayed by consumer advertising and are incredibly brand loyal. However, this generation also believes in the power of saving money, relies far less on loans than Generation Y, seeks out fixed returns and characteristically avoids extravagant spending at any cost.

Generation Y: Personal Finance Customs

According to a recent survey done by Bank of America, 84% of Millennials are very confident in managing their own finances (Bank of America, 2015). However, this generation faces an incredibly uncertain economic future, with a wider gap between the upper and middle classes than ever before. Although Millennials are earning proportionally the same amount of money as Generation X did at their age, many Millennials will not be able to achieve the majority of their goals (finding their dream job, buying a house or retiring) as soon as Generation X. The chart below displays the exact financial concerns for Generation Y today. Paying off student loan debt has become increasingly difficult, since the average member of Generation Y has $48,000 in student loan debt. As college tuition increases immensely and more career paths require higher education, Millennials have been forced to take out loans to pay for college. On top of that, America has seen historically low wages, making it very burdensome for Millennials to make enough money to start saving. Members of Generation Y today increasingly worry about meeting their current expenses, paying household bills and getting rid of debt. In an attempt to make ends meet, Millennials are relying more and more on credit cards. Invest Trust Management surveyed Millennials on their credit card use, and though 30% of Generation Y uses credit cards to pay for month necessities, only 40% of those people find it difficult to make their minimum credit card payments each month (2016).

As for optimistic news, the economic fallout after terrorist attacks such as 9/11 and the Great Recession in 2008 resulted in the adoption of an increasingly global mindset among Millennials. Social responsibility and environment protection influence Generation Y’s investment decisions, as well as crowd mentality (Millennials often rely on advice from peers when it comes to investing, as many are left with sour views towards the investment advice from “greedy” salesmen). In a study done by LinkedIn, 86% of Millennials admitted social media is a “must” for obtaining financial information and financial advising.

Though the financial future of Millennials is not guaranteed today, this generation is being proactive, not only in investing their money but also in regards to thinking about retirement. The Transamerica Center for Retirement Studies found that 70% of Millennials have started saving for retirement at a median age of 22 years old (2014). Known as a relatively idealistic generation, difficulties with student loans and financial instability have not trampled Millennials’ dreams of defying the negative odds. In comparison though with Generation X, a much smaller proportion of Millennials are setting aside money for times of crisis.

Generation Y’s lifestyle and spending habits are unprecedented as well. More people in this generation are spending their money on experiences and travel rather than material possessions. Only one-third of Millennials own a home and many people in this generation believe that renting is simply a more affordable option. Also, in regards to domestic change, Generation Y is progressively putting off marriage and starting a family later in life. As for their work life and businesses, Millennials are much more enthusiastic about their careers and use social media and technology to promote their entrepreneurial ventures. Although there is a great amount of economic uncertainty, Millennials are relatively prepared for their futures and remain optimistic about their economic success.

Effects of Generation X and Generation Y’s Economic and Financial Footprint

One important similarity between the two generations is that both groups recognize the importance of financial planning and financial advising (no matter where the advice comes from!). Although the immediate monetary demands of the two generations differ, creating and following a budget can alleviate many of the financial woes people in either generation experience. It is also important for both generations to continue to invest and save. As for Millennials, a trend towards increased saving for emergencies would prove beneficial, since there is great economic uncertainty in the future. While Millennials are focusing less on material possessions and more on experience purchases, Generation X can counterbalance this shift as the most powerful purchasing power in the world. However, economic markets ought to alter their priorities if this trend continues, so when Generation X decreases their spending in the future, the world's material trade does not suffer. The economic, social and political factors that have influenced these two generations also impacted the financial patterns of the groups. Though they differ greatly on lifestyle choices and investment patterns, both generations are responsibly planning for their financial futures, which is essential for economic success.