Different generations, like Gen X, Millennials, and Gen Z, have distinct financial habits shaped by their experiences. These differences impact their spending patterns, approaches to retirement saving, and preferred saving methods. Understanding these generational behaviors can offer insights into how you can plan for your financial futures.

Gen X

Gen X, born between 1965 and 1980, is often characterized by financial caution. Having experienced economic challenges, they prioritize stability, which influences their spending, saving, and retirement planning habits.

What are the spending habits of Gen X?

Gen X tends to be cautious with spending, yet 19% of them overspend weekly. 27% of Gen X has less than $1,000 in savings, as found by the 2024 Forbes Advisor Survey. Though financially experienced, Gen X saving habits reflect a balance between spending and securing their future.

Gen X tends to focus on finance essentials like mortgage payments, education costs, and healthcare, while still managing discretionary spending. Despite their higher incomes, economic pressures such as rising living costs impact their ability to save consistently. This generation is known for prioritizing financial stability while navigating the balance between immediate needs and long-term goals.

Gen X retirement savings

Generation X faces significant challenges, including balancing late-career income with growing financial pressures, such as healthcare costs and supporting children. While some have prepared adequately, many will likely struggle to meet their retirement goals without increasing savings or relying on alternative income sources.

How is Gen X saving money?

According to a Bureau of Labor Statistics report, Gen X was the first generation to enter the workforce with 401(k) plans, replacing traditional pension plans in 1978. As a result, they focus heavily on self-managed retirement savings.

Research from Credit Karma found that Gen X carries an average of $61,036 in personal debt, the highest among all age groups. As a result, they often adopt aggressive strategies, focusing on debt repayment while also setting aside money for emergencies and retirement.

Additionally, real estate is a popular investment for Gen X, with many preferring low-risk portfolios over the riskier investments younger generations favor. They are also more likely to use conservative, long-term strategies to build wealth and secure their financial futures, balancing debt management and mortgage loans with saving efforts.

Millennials

Millennials, born between 1981 and 1996, grew up during rapid technological advancements from mobile phones to the internet and economic disruptions such as the 2008 financial crisis. These factors have shaped their financial habits, including how they spend, save, and approach long-term financial planning.

What are the spending habits of Millennials?

Millennials exhibit unique spending habits influenced by technology and values. First Merchants Bank found that many Millennials overspend on services like streaming platforms—13% of those surveyed report exceeding budgets on subscriptions for Netflix, Amazon Prime, Disney Plus, and Hulu. Food delivery is another area of overspending, with 31% of Millennials surveyed admitting to spending more than intended on takeaway meals.

Despite these habits, Millennials are value-driven; nearly half prefer brands that support social causes.

How much does the average Millennial save for retirement?

The average Millennial has saved $49,900 for retirement, but they are expected to need around over $1 million to retire. This significant gap highlights the financial challenges facing Millennials, especially with 31% having less than $1,000 saved, as reported by Forbes.

How are Millennials saving money?

Millennials have unique saving strategies, often leveraging technology to enhance their financial strategies, using apps like Robinhood and Acorns for micro-investing.

Despite 24% of Millennials feeling unsure about budgeting and managing cash flow, nearly half of Millennials (44%) engage in side hustles or alternative income sources, according to Bankrate’s Side Hustles Survey, which helps boost their savings.

Gen Z

Gen Z, born between 1997 and 2012, is the first generation to grow up with smartphones and social media. Their unique experiences shape their financial behaviors, influencing how they spend, save, and approach money management.

What does Gen Z spend money on?

Gen Z displays more frivolous spending habits with First Merchants Bank reporting that 43% of Gen Z overspend every week. 1 in 7 Gen Z’s overspend on streaming services, with 15% exceeding their budgets for platforms like Netflix, Amazon Prime, Disney Plus, and Hulu and on their hobbies - 32% of Gen Zers overspend on their hobbies.

Food delivery is another area of concern, as 34% of Gen Z overspend on takeout. With US grocery prices rising 22% since 2019, as reported by The Guardian, ordering from services like DoorDash and Grubhub has become a frequent alternative to home cooking, blurring the line between occasional indulgence and everyday necessity. 

How much money will Gen Z need to retire?

As Gen Z prepares for retirement, the average individual has only saved $29,300, while they are expected to need over $1 million. This substantial gap poses significant challenges for the generation.

Additionally, 32% of Gen Zers have savings of less than $1,000, as reported by Forbes, highlighting the urgency for better financial planning with saving goals. Many in this age group are still navigating student debt and rising living costs, which may hinder their ability to save effectively. As younger members of Gen Z enter the workforce, developing strong saving habits such as establishing credit, will be crucial for securing their financial futures.

How is Gen Z saving money?

Gen Z employs innovative saving methods, often inspired by online trends and social media. One popular approach is the 100 Envelope Challenge, where participants save money by filling 100 envelopes with varying amounts, promoting consistent saving habits.

Additionally, "loud budgeting" has gained traction on platforms like TikTok, where users publicly share their budgeting strategies and financial goals, fostering community support and accountability. These methods not only make saving more engaging but also encourage Gen Z to take control of their finances, building emergency saving funds in a fun and relatable way. By embracing these creative strategies, they can build healthier financial habits for the future.

Reach your savings goals with First Merchants

The spending and saving habits of Gen X, Millennials, and Gen Z reflect their distinct experiences and challenges. Gen X grapples with retirement planning amid current expenses, while Millennials contend with a significant savings gap due to back-to-back economic shifts. In contrast, Gen Z navigates rising living costs while building a solid financial foundation by embracing innovative saving methods inspired by social media trends.

While each generation faces unique financial challenges, First Merchants is here to support customers and provide savings account tips for every generation. Establishing a savings account is crucial for building financial security, enabling individuals to save effectively and prepare for future needs.

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