Financial Foundations for All Generations Brogan Financial

Financial literacy in America is a growing problem. According to a FINRA (Financial Industry Regulatory Authority) survey, 71% of Americans show high confidence levels regarding financial capabilities and financial proficiency. However, the confidence remains unfounded because the same US adults correctly answered only around half of the questions on the financial literacy exam.1

In addition, much has been made about the generational differences between today’s working generations, from Generation X to Y and Z. I think we need to be careful with applying labels; I’ve met many people over the years who are not a “typical millennial or Gen Xer”, for example.  However, there are key societal differences in the ways different generations were raised, how they feel about money, and how different economic challenges have affected them.

What are the overriding financial characteristics of these generations, from those born from 1965 through today’s wave of post millennials (Generation Z)? And how can we apply core financial principles to help these generations be financially successful?

Gen X

Generation X (Gen-Xers) represents those born between 1965 and 1981. Gen-Xers grew up to be very self-reliant, as research shows that nearly 50% of Gen-Xers grew up in a two-income household, and 2 in 10 grew up in a single-parent household.3 This generation also grew up amidst post-war reconstruction in Europe and faced the fractured economic challenges of the 1970s and early 1980s. When they entered the workforce, there was not much room for idealism. Instead, they pursued individualism, ambition, and hard work.

Generation X was raised with the American Dream: attend college, work hard, own a home, and accumulate “stuff”. As this generation now begins to think about retirement down the road, they also face the financial challenges of the rising costs of college along with the financial burden of owning expensive homes and cars.

Gen Xers also saw the Great Recession of 2007-2009 come at a time when it had a major impact on their wealth. And, in a recent study from Fidelity, more than half of Gen-Xers are saving less than 10% of their income.3 The cumulative effect of expensive lifestyles, more debt and economic instability have pushed back the expected retirement dates of a typical Gen Xer.

Alternatively, Generation X is now approaching the last 10-20 years of their working lives, which typically represent their highest earnings years. Consequently, these are great years to “get ahead” financially. Following are a few tips for Gen-Xers:

  • As income increases, try to save at least 50% of the increase in take home pay. The best choice for additional investment is usually to try and max out the company plan (401K, 403B, etc.), as these plans provide tax advantages for wealth accumulation.
  • Pay off any credit card debt.
  • If you still have kids to get through college, consider lower cost alternatives like community colleges and public universities.
  • Be sure to examine the investment mix in your 401K, 403B or other company plan. As you get closer to retirement, be sure to diversify more into asset classes other than just stocks and stock funds.


Generation Y, commonly called Millennials, was born between roughly 1981 and 1994. This generation is the largest in size since the baby boomers.

Millennials are also known as “digital natives”.4 However, while technology is a regular part of their daily lives, they were not born into technology. Instead, they migrated to technology from an analogue world during their childhood.

Millennials also had either freshly entered the workforce or graduated college during the Great Recession (2007-2009). Consequently, while Millennials are the most educated generation to date, many have had great difficulties finding jobs and staying employed.

Due to these challenges, Millennials typically do not regularly save and invest for their future; rather, they live day-to-day and week-to-week. In addition, due to their fear of losing money, they are much more apt to save money at the bank rather than invest into their 401K.3

Millennials, as a rule, are also much more altruistic and desire a work-life balance. They typically have a greater sense of idealism and wish to make a difference in the world.

Financially, Millennials have faced challenges of underemployment, high debt (especially student loans) and economic uncertainty in their formative years. To combat these realities, Millennials can develop financial literacy to learn more about how money works:

  • Understand good debt (house or starting a business) vs bad (consumer and credit card debt).
  • Develop your budget.
  • Pay yourself first, meaning invest in the future. Then, develop the budget with what’s left.
  • Understand core wealth principles like tax deferral (401Ks and IRAs) and compound interest.

Gen Z

Generation Z (Gen-Zers) represents those born 1995 and afterwards. This generation was born into technology, so connectedness is a core fabric of their being. It did not have to be learned. They also readily adapt to change in an increasingly changing world.

Gen-Zers saw their parents and grandparents deal with a good deal of economic uncertainty.  Consequently, most in Gen Z list financial security and wealth accumulation as one of their top goals in life.3

Gen-Zers tend to work hard and have a desire to be financially well off. Consequently, they are less likely to accrue high amounts of student debt, and they are more inclined to save and invest for the future. They appear to be very driven, and career-focused, and they believe more in the traditional American Dream.

Gen-Zers – due to their younger age, their desire for lower levels of debt, their predisposition for financial security, and their career mindedness – are equipped with many traits to get ahead financially. However, financial literacy continues to be a problem. According to a recent TD Ameritrade study, only 17% view the stock market as a good way to invest to build wealth, while 47% believe a savings account is the best vehicle.4

Consequently, pursuing financial literacy is a huge opportunity for today’s young workers and college students:

  • Understand the time value of money.
  • Learn the power of starting early, and the power of compound interest.
  • Understand time horizon and the importance of saving and investing into “buckets” of money based upon when the money will be needed.
  • Establish a budget and live within your means.
  • Learn how to manage good debt while not accumulating bad debt.

Building financial literacy in our children and grandchildren should be a big emphasis as we age. We have an opportunity to impact our families and friends, and therefore impact the world.

In addition, understanding the biases, cultural differences and economic realities of different generations can profoundly impact our awareness and ability to help those around us who are most important.