The boomer generation often appears to be in a stronger financial position compared to younger generations like millennials and Gen Z. Much of their success can be attributed to sidestepping common financial pitfalls that have become more prevalent today. Here are 16 financial traps that boomers managed to avoid despite younger people struggling with them.
Retirement
The Guardian writes, “Only about a quarter of millennials have done ‘a great deal of planning or thinking’ about retirement, according to a study by Standard Life.” Younger generations have a lack of savings for retirement and haven’t thought about planning ahead. It shows just how important it is to have retirement in the back of your head.
Credit Card Debt
Boomers are known for having lower levels of credit card debt compared to later generations. They have more conservative spending habits and have been able to avoid any high-interest debt. Younger generations haven’t been so lucky and face high interest charges as they need to use their cards more.
Single Incomes
Unlike many younger generations, boomers married early, which meant they had dual incomes. This is supported by Yahoo! Finance, which writes, “With Boomers, as they married young, there were often two wage earners in a household, so net worth increased.” Millennials face challenges because many only have one income.
Wealth Building
Boomers have had time to recover from any financial instabilities. They have also been able to watch their wealth grow over the years from where they’ve been able to invest money. Many younger generations haven’t had the luxury of investing, with many not having enough money to make significant investments.
Expensive Housing Market
Housing was more affordable when boomers were younger, which meant many were able to purchase their own property. Younger generations are left renting because house prices are now too expensive. Homeownership is also a great way to build wealth, which millennials and Gen Z are missing out on.
The 2008 Financial Crisis
Fiscal Tiger writes, “While many baby boomers already had years of work experience and savings behind them, the recession permanently stunted millennials’ professional and financial growth.” Even though boomers saw their retirement fund plummet, they had enough time to recover from this, whereas being younger, millennials found it difficult to find employment.
Pensions
Boomers have relied on consistent income from their pensions. A boomer will find it easier to predict the amount of money they’ll have coming in from their pension, but a millennial may not know how much they’ll have in their pension.
Student Loan Debt
Boomers had lower tuition fees when they went to university compared to what the younger generations do now. The rising costs of education have become a huge burden for both millennials and Gen X. They’ve created long-term financial impacts and made it difficult when it comes to other financial aspects, such as mortgages.
Job Security
Money.com writes, “Due in large part to increasingly common university-education requirements in the workplace, most older millennials aren’t able to land good jobs until their early 30s.” Boomers have also had longer tenures at their jobs, which means they’re going to be more secure than the younger generations.
Mortgage Debt
Boomers had an early entry into the housing market when purchasing a house didn’t come with a huge mortgage. Boomers have also had the advantage of their homes increasing in value over time. Younger generations face serious levels of mortgage debt, and that’s after they’ve saved for a deposit.
Stock Market Challenges
Unlike later generations, boomers have been able to capitalize on long-term growth trends that have come from the stock market. There are generational differences in market timing and investment strategies. There have also been challenges for younger people entering the stock market at higher valuations.
Freelance or Gig Work
Many younger generations have chosen the career path of freelance or gig work. This allows a person to have a better work-life balance, but it can take its toll financially. The BBC writes, “While full-time work is generally protected under employment law, freelance or gig work is more vulnerable to sharp drops in demand.”
The Digital Evolution
Boomers experienced a slower pace of technology development, which meant they could gradually adapt to it. Younger generations have had to keep up with a much faster pace. This can affect them financially by making them think they need the latest gadgets, or they may even fall victim to scams.
Payday Loans
Boomers have less reliance on payday loans and high-interest loans that are intended for short-term lending. They are used quite frequently by younger generations when finances are starting to run low. While these loans seem like a good idea at the time, there are long-term consequences that come with them.
Economic Conditions
Boomers were able to experience the post-war economic boom. For example, History.com writes, “With the war finally over, consumers were eager to spend their money on everything from big-ticket items like homes, cars, and furniture to appliances, clothing, shoes, and everything else in between.” Younger generations have not seen any economic expansion, just the opposite.
Wealth Transfer Challenges
Boomers have had the opportunity to plan and execute wealth transfers to younger generations. There are challenges faced by younger generations who may not have a significant amount to pass on to their younger generations. Estate planning plays a huge role in wealth transfer, and younger generations worry about not having property to pass down.