There is just something about familial relationships and money that brings out the good, bad and ugly in people.
According to research by Northwestern University’s Kellogg School, Only 30% of family businesses make it to a second generation. The different value systems each generation holds and the other generations’ misunderstanding of them usually leads to complications and all manner of challenges. This is very evident in multigenerational family-owned businesses. For the TV series enthusiasts, even the HBO award-winning TV show ‘Succession’, is all about family ties and a family-owned business.
From Baby Boomers, Gen X, Gen Y or millennials as they are most popularly called to Gen Z who are also called digital natives – these 4 generations were brought up in quite different situations and this has led to marked differences between them.
Let’s look at the behaviours:
The prosperous time of the Baby boomers (born between 1946 and 1964) made them not pay much attention to multiple sources of income. They simply focused on saving, mortgages and their eventual pensions. A few proactive ones were however able to take advantage of the stock market.
Members of Gen X (born between the mid-60s to the early 80s) are more likely to put their money in banks or make long term investments that yield returns in a decade or more. This is probably because they saw what their parents did and simply iterated on it.
However, Millennials (born between 1981 and 1996) are not as risk-averse as their parents. This is probably a result of the financial crises that a lot of them saw their parents go through despite the fact that they weren’t adventurous.
Gen Z (born between 1996 to 2021) is very similar to the millennials but they take it further because their trust is fully in digital services as that is all they have known since birth. This is still a developing demographic. As time goes on, they will probably exhibit behaviour that more distinctly separates them from the previous generation.
As a Wealth Manager, in dealing with clients and their multi-generational families, I have learned to factor in the differences between the different generations and how it affects their approach to certain things that involve their finances. My observations over time are:
Due to the rise of consumerism and corporations during their day, Baby boomers are typically pragmatic. They have a great value for performance and due to the upward performance of the economy during their day; they have a generally positive outlook on life.
Gen X is made up of people who value societal norms. Let’s look at it from my home country of Nigeria, the average educated Gen X makes a lot of decisions based on “what will people say”. It’s also the reasoning behind their focus on white-collar careers; they must do something perceived as functional and socially approved.
Millennials and Gen Z, on the other hand, have more value for creativity and expression. Even in the face of social disapproval, they are more likely to go after their passion before anything else. They don’t typically have as much faith in societal institutions as they have seen some of those institutions fail the previous generation. Also, the focus Gen X places on their society usually narrow their mindset to their physical location but in the case of the millennials and Gen Z, the advent of the internet has given them a global mindset that stems from their digital interaction with different people and experiences from all over the world.
Approach to Money
Baby boomers can be very conservative with their use of money. They used to be big spenders in their youth (the economy supported it at the time) but after several economic crises, they have learned to slow down their spending. However, their approach to wealth management remains conservative. Personal savings, pension funds, mortgage, and retirement plans have made up the bulk of their investments.
Gen X is more frugal and calculating with their use of money. Gen X is likely to save/invest their money in a bank, stocks or more physical assets like real estate.
Millennials and Gen Z are more likely to save/invest money into digital assets like financial tech services, cryptocurrencies, etc. Something else to note is that Millennials and Gen Z are more socially conscious than their predecessors; they are more likely to engage in impact investing as this benefits themselves and the world around them.
Approach to Work
Baby boomers have always had a ‘live to work’ mentality. The days of their youth were a time of nation-building so there was an excess of work and not enough workers. This has led them to place a lot of focus on their professional lives as they directly tie it to their self-worth.
Gen X is independent, self-sufficient and resourceful when it comes to their careers. They also possess a hard-working work ethic and an adaptable approach. With their do-it-yourself attitude, they prefer open management. This allows them to work independently and find functional solutions to problems.
Millennials, above all else, value collaboration, and a desire to feel part of something. They typically want some kind of feedback concerning their work. Because of the vast information on the internet, they work to find creative solutions to problems and they value the opportunity to use their existing skills or learn new skills to solve those problems. This causes friction between them and Gen X; their creativity in problem-solving can be seen as cutting corners in comparison to the functional problem solving used by Gen X.
Gen Z is more independent than the millennials. They are more motivated to work for socially conscious companies. Both Gen Z and Millenials have become increasingly interested in remote work and the flexibility that comes with it.
From the different approaches of the generations, one can begin to see the financial choices each generation is likely to make:
Baby boomers are more likely to invest in the safest options: Retirement funds, pension schemes, etc. They also would not mind infrequent updates as long as those updates show positive results.
Gen X is more interested in investments in the stock markets, real estate and banking. Just like their predecessors, they prefer occasional updates.
Millennials and Gen Z would be more interested in investments in tech and tech-enabled businesses, cryptocurrency and socially conscious companies.
Constant and on-demand updates would be their preference because they are used to constant information.
To be continued…..