A recent study from the University of Georgia has revealed that financial well-being varies significantly across generations. The research, based on data from the 2016 Consumer Financial Protection Bureau’s National Financial Well-Being Survey, analyzed the financial knowledge, skills, and behaviors of baby boomers, Generation X, and millennials. The findings indicated that millennials showed lower levels of financial well-being and knowledge, while boomers had the highest.
Financial knowledge and money management skills also tended to increase with age. “We focused on the differences in the relationships between financial knowledge, skill, and behavior and the financial well-being of these three generations to gain a broader understanding of how people learn and use their financial knowledge and skills differently by generation,” said Lu Fan, PhD, CFP, lead author and an associate professor at the University of Georgia. Researchers assessed financial well-being using a variety of factors, including personal financial knowledge, financial skills, day-to-day money management, commitment to financial goals, and saving regularly.
Millennial financial knowledge concerns
Despite these considerations, millennials showed less financial knowledge and poorer money management skills, which may be detrimental to their overall financial well-being. “Millennials reported lower knowledge mostly because they’re younger and still learning,” said Fan.
“Boomers reported higher financial knowledge, likely because they’ve accumulated knowledge through life and experiences.”
Setting and following through with long-term financial goals were also linked to increased financial well-being. While sticking to financial goals was important for all generations, it was especially crucial for Gen Xers, who need to plan their spending leading up to and during retirement. Due to these varying relationships, the study found that financial advisors and educators might best serve their clients by tailoring programs to fit the needs of different generations.
“Millennials face various mid-life financial choices and long-term planning decisions, so improving their financial knowledge, skills, and behaviors is crucial for better financial well-being,” Fan explained. Most boomers are now in retirement, so understanding their financial needs and management behaviors during this life stage is essential.
The study was co-authored by Robin Henager, PhD, an associate professor of economics and associate dean at Whitworth School of Business in Spokane, WA.
Image Credits: Photo by Josh Appel on Unsplash
