How does your generation spend and save? You may think you’re not typical of people born at the same time as you. But experts do see broad spending and saving trends as each generation moves through its life cycle.

Right now, Millennials are the ones in the spotlight.

Born roughly between 1981 and 1995, Millennials are the largest generation by number, at over one million.

Millennials are often blamed for ‘killing’ traditional industries by not spending enough money on things like cars, golf, and antiques.

And if only they wouldn’t spend so much on avocado on toast, they could afford to buy a house, right?

Millennials have less to spend

Research has found that Millennials have less disposable income than either the Baby Boomers or Gen Xers had at the same age. They face higher student loans, higher house prices, and lower incomes.

“We’re living in a more challenging financial landscape than ever before,” says Hannah McQueen, the founder of EnableMe.

“The cost of living has increased, salaries have not gone up proportionately and there’s easy access to debt. Consumerism is a way of life and not making financial progress has been normalised,” McQueen says.

It’s all about the food

Millennials are spending their money on environmentally friendly and sustainable products, particularly food, says Darren Hopper, head of digital payments at Paymark.

“We know that under-30s spend 20 per cent of their disposable income on food, compared to only 12 per cent for those over 30,” he says.

Fee fears

Hopper says growing up with the gloom of the Global Financial Crisis of 2008 has left some younger Kiwis nervous about traditional financial products, and more interested in trying something new.

“Millennials and Gen Z are shying away from credit cards, because they’re wary of the costs and fees – they’re keen to try new technology,” says Hopper.

“Our merchants with lots of younger users, like Tank and Burgerfuel, offer Online Eftpos and have seen that really take off.”

Another financial tool Millennials have embraced has been KiwiSaver, says Richard Klipin, chief executive of the Financial Services Council.

“For New Zealanders over 65, property is their substantial asset base.

“For ‘Generation KiwiSaver’, those aged 18 to 34, they’re much more reliant on KiwiSaver as their primary asset to fund their retirement.”

Houses are not the key

The old Baby Boomer financial model was ‘work hard, buy a house, pay it off, and downsize in retirement’. With much lower housing affordability, that model no longer works, says Klipin.

“That opens up a whole Pandora’s box when it comes to the future of work and retirement.”

He says KiwiSaver will be a major source of income when Millennials retire, particularly for those who haven’t been able to afford a house.

Gen X feels the squeeze

Generation X (roughly born 1965 to 1981) is sandwiched between two much larger generations – and feeling the squeeze.

People in this cohort are in their prime earning years, with higher incomes and spending levels than any other generation. They also have the highest debt levels of any group, according to Statistics NZ, with most of it tied up in real estate.

Gen Xers are feeling the financial pressure, trying to think about retirement while potentially looking after not only their children, but also their parents.

Both Millennials and Boomers are more likely to spend extra for sustainable and ethical products, according to research by Nielsen.

McQueen says the research is partly about the age difference.

“Millennials feel like they’re the only ones to care about the bigger issues, but they will have their own ‘come to Jesus’ moment when they have their kids,” she says.

“Kids bring out the survival instinct in us and our priorities change.”

Life satisfaction poor in 40s

Right now, members of Generation X are at the toughest age. A large body of research found life satisfaction starts to fall when we’re in our 20s and 30s, hitting rock bottom in our 40s, before beginning to rise again once we pass the age of 50.

Gen Xers are often worse off financially than their mums and dads, too, unlike Baby Boomers who generally outperformed their parents, according to intergenerational research conducted by the UK’s Resolution Foundation.

That same study shows the trend flowed down to Millennials and Gen Z, who may find themselves financially underperforming not only their parents, but also their Boomer grandparents.

Baby Boomers hit the jackpot

Often blamed for hoarding wealth and contributing to low housing affordability, Baby Boomers (born 1946 to 1965) were the lucky beneficiaries of an economic sweet spot. This included fast-rising house prices, free education, moderate inflation and a growing economy through the 1990s and early 2000s.

This is New Zealand’s wealthiest generation, with a lot of that wealth tied up in houses, according to the Roy Morgan State of the Nation survey.

With money to spend and no longer in survival mode, Boomers are once again thinking about saving the world.

They often look for sustainable products that won’t harm the environment. Many wealthy Boomers are enthusiastic about trying to leave the world a better place for future generations, according to several local surveys. including one by Colmar Brunton.

They’re out of the happiness trough and on the upside, where life satisfaction increases until we reach around 80 years old.

Of course, Boomers want to live well beyond 80. Global research, including a Hartman Group report, shows Boomers spend up large on health and wellbeing, and are living longer, healthier lives – allowing many to delay retirement and downsizing.

They often spend their wealth in traditional retail outlets, particularly supermarkets and department stores, much more so than Millennials, says Hopper.

Convenience is king

And although their uptake of technology is slower than younger Kiwis’, Boomers and the Silent Generation are rapidly embracing the convenience of supermarket delivery, click-and-collect and online shopping, according to Hopper.

“The drive towards convenience seems to be boundless – we think everything will just become more and more convenient.

“It’s pushed by Millennials, but older Kiwis are finding the convenience of buying online is outweighing the cost of figuring out how to do it.

“I’m the IT helpdesk for my grandparents and I’m sure many other Kiwis are in the same boat,” he says with a laugh.

Ultimately, generational spending patterns are mainly ‘time of life’ trends, says McQueen.

When we’re younger, we spend mainly on ourselves, limited by our lower earning power – statistics show we earn the least in our teens and the most in our 40s. As we advance financially, we take on more responsibilities: partners, kids, and debts.

Later in life we become free from some of those responsibilities and we’ve hopefully built up enough wealth to have more choices, despite a reduced income after retirement.

Whatever generation you’re in, or whatever your age, you can improve your financial outlook, says McQueen. Start by thinking about your own money goals, spending psychology and situation.

“Try to become more financially intelligent, and then work out how to apply your knowledge to your own situation,” McQueen says.

Yes, it’s easier said than done, she says, which is why a financial adviser can really help.

“Know who you are, understand your spending tendencies and develop a strategy that will acknowledge your constraints and play to your opportunities.”

Published 29 May 2019

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.