From Boomers to X To Y: Generations Affected by Recession in Vastly Different Ways

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July 31, 2013 - 6:30am

The recession hit Americans across the country, but its effect on each generation varied drastically; as a result, there’s a marked difference among how Baby Boomers, Gen X and Gen Y approach debt and loans, savings and credit.


Back in the 1980s, credit cards were “Everywhere you want to be,” as one famous ad campaign put it. Flash forward 30 years, and suddenly, it seems they’re everywhere many young people don't want to be.

Take Naomi See. The 34-year-old Omahan saw her father abuse credit cards time and time again, resulting in her parents twice filing for bankruptcy.

Struggling with your personal finances?

Here's some advice from Sharon Taubert, vice-president with the non-profit Consumer Credit Counseling Service of Nebraska.

  • See a credit counselor. Taubert described credit counselors as negotiators or mediators between consumers and financial institutions. They can help you navigate your way out of debt.
  • Always do a 401(k) if your job offers one. 
  • Make a budget - and stick to it.
  • It's never too early to start saving, even if it's only $50 a month.
  • Don't make purchases unless you can afford them.
  • Learn to balance your "checkbook" - or, for those who mostly bank online, learn to monitor your spending habits, whether it's by entering information into a spreadsheet or having your bank send you weekly or monthly reports. 
  • Do your research, even if it's a simple Internet search or talking to your friends. Try taking a personal finance course to educate yourself.
  • Avoid bad credit, but try to build good credit. Without good credit, it can be difficult to get a loan for a car, house or school loans. Sometimes, without good credit, you even need a co-signer to rent an apartment.
  • Talk to your parents about their finances. Learn from their mistakes, but also learn what strategies have worked for them.
“And I just … it scared me. It scared me away,” she said. “Throughout my whole 20s, I was cash only. I didn’t get a credit card, I didn’t have a checking account, I didn’t want any of that responsibility.”

According to FICO, a credit analytics company, the number of consumers aged 18 to 29 without a single credit card has doubled since the recession hit in 2007.

That’s just one of the big differences that have emerged between Baby Boomers, Generation X and Generation Y when it comes to personal finance, said Kelly McDonald, a consumer trends consultant.

Essentially, while Baby Boomers are struggling, she said many in Generation X are doomed, while members of Generation Y are simply overwhelmed.

Generation X

“You know, every generation of Americans have always done better than the previous generation financially,” she said. “Gen X is actually the first generation that is expected to not do as well as their parents.”

Generation X, which includes people aged roughly early 30s to late 40s, has always been a skeptical and jaded generation, McDonald said. She pointed to their experiences with supposedly stable institutions becoming unraveled, like marriage and the economy.

“And especially when it comes to things like their financial future, they’re really skeptical. More than half believe that they will be in debt for the rest of their lives,” she said. “More of them believe in UFOs than in the fact that social security will be there for them when they need it.”

As a result of this attitude – and the fact that Baby Boomer parents have been, in McDonald’s words, “terrible” when it comes to educating their Gen X or Gen Y children about personal finance – many Gen Xers have “thrown in the towel,” she said. For example, according to a report from the non-profit Insured Retirement Institute about 60 percent of Gen Xers have never even tried to calculate how much money they might need for retirement.

“Because they were late to invest and they have not saved all that much money,” McDonald said, “they are predicted to be in pretty dire straits. They’re really going to be broke.”

The recession certainly didn’t help. According to a Pew report, Gen Xers lost nearly half of their wealth in the economic crisis, compared with about 26 percent for Baby Boomers. That Insured Retirement report found 15 percent of Gen Xers made early withdrawals from their 401(k) plans; 23 percent stopped contributing to their retirement accounts.

“That, to me, dovetails with people earning their money through entry level positions – positions without benefits,” said Katie F.S., a 34-year-old Omahan who uses initials as her last name. The education contractor said many in her generation couldn’t save money even if they wanted to.  

For her parents’ generation, she said, buying a home or buying a car were signs of independence.  But for Generations  X and Y, simply getting your own apartment or getting a career job are the new benchmarks: the number of Americans between ages 25 and 34 who lived with their parents in 2010 jumped 25 percent from 2007, according to U.S. Census data.

“If you have a position that will afford you health benefits and a retirement plan, that’s a jackpot,” F.S. said.

So what are Gen Xers to do?

Generation Y

One prominent blogger said he’ll simply turn to his children for help.  And really, that might not be such a bad idea. After all, on average, Generation Y is incredibly concerned about its financial wellbeing and is eager to save, invest and minimize debt.

(Gen Y roughly includes people in their early teens to their early thirties.)

“Gen Y is actually saving and investing more than other generations at a younger age,” said consultant McDonald, “and I think, again, it’s because they’ve been exposed to either watching their Gen X parents or their Baby Boomer parents struggle.”

The intention is there, she added, but not the knowledge.

“The irony is that they don’t really understand (having good personal finance),” she said. “They’re doing it, because they know they should, but they truly have no clue what they’re doing.”

That’s because many Gen X and Gen Yers didn’t receive personal finance education from their parents; several young people I spoke with talked of parents simply handing them a credit card or a checkbook. Almost 30 percent of Gen Y report having trouble managing their spending.

And apart from ignorance, Gen Y is also carrying around significant debt. Americans who graduated from college in 2011 had an average of $26,600 in student loans. And there’s also credit card debt – McDonald said accounting for inflation, Gen Y is expected to have $6,000 more in credit card debt at the age of 45 than their parents did.

25-year-old Hillary Jo Hewood Finley finished paying off about $2,000 in credit card debt this spring. Sitting in the Omaha home she bought with her husband, feeding her infant daughter, Finley said she’s done with credit cards for good.

Her student loans, however, linger on – and trying to put aside savings is a challenge.

“We try to save still, even though it’s kind of like paycheck to paycheck,” she said, “especially after we just had the baby.”

Moving forward

But even small steps can go a long way, said Sharon Taubert with the non-profit Consumer Credit Counseling Service of Nebraska.

“It’s never too early to start saving and start investing your money. Do your research. Ask questions. Ask your peers what’s worked for them.”

Overall, Gen Y and younger members of Gen X say they don’t want to repeat the financial mistakes of older generations.

Naomi See, the Omaha woman who swore off credit cards in her 20s, said she learned the importance of building good credit after educating herself about finance. Now in her 30s, she currently has a credit card. She also uses a detailed spreadsheet to track her spending, and has her budget set for six months out.

“I’m just very meticulous,” she said with a laugh. “I feel like I’m almost overly analytical with it now because of my parents’ mistakes and just watching them struggle.

“I just really don’t want to repeat their steps.”

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