All generations have made headway when it comes to retirement savings, but Generation X is the weakest generation when it comes to finances, especially money management.
What makes a generation prepared for retirement is how it handles the basic foundational issues that cause the most financial stress, said Liz Davidson, founder and CEO of Financial Finesse in El Segundo, Calif. Those include how they handle cash flow—do they spend more than they earn each month?—paying off credit card balances in full each month and having an emergency fund.
“Gen X is doing less than the Millennials, which is surprising to us. Millennials are probably making less income and transitioning from college to paying for everything themselves, but they seem to be doing better than Gen X,” she said.
Part of the problem is that Generation X is at a different point in their lives than the Boomers or Generation Y. They are married, have children who need to go to school and have parents who may need elder care. The Boomers have already gone through this stage and the Millennials haven’t reached it yet. That made Gen X “vulnerable from that perspective, going into the recession,” Davidson said. With college expenses rising and health care costs exploding, it was the “perfect storm” for Generation X. Generation X encompasses 70 million people between the ages of 30 and 46.
So how bad is it? Financial Finesse, which provides financial wellness programs to large companies across the country, mines the data it receives from all of the participants enrolled in its programs. What it found is that 67 percent of people under 30 reported paying off their credit card balances in full each month, compared to 59 percent of Generation X.
“I would have expected that to be the opposite,” Davidson said. This is an improvement for Generation X, as only 44 percent of this generation reported paying off their credit card in full in 2010.
“They are slightly less likely than other age groups to have an emergency fund as well and are least likely to have a handle on their cash flow, spending less than they make each month,” she said.
One mistake that Generation X makes is “to prioritize our children or our parents above our own retirement,” Davidson said. “In some cases, we’ve worked consistently with employees who can’t afford [to pay into retirement] on a day-to-day living level. They are getting further into debt taking care of other people, which eventually is not going to work for them or whoever they are taking care of.”
People are paying for their children’s college educations and living in houses they can’t afford, but they don’t want to move and put their kids in a different school district, she said. “It’s a process of realizing you can’t always have everything you want right now, so how are you going to prioritize?”
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