Lead by Example? Hardly — Boomer Kids Out-Saving Their Parents

Boomers have never been great at putting money in the bank. Maybe they should listen to their kids.

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Maybe saving skips a generation. Boomers have never been great at putting money in the bank—even though their Depression-era parents were famously frugal and a new survey shows that their kids are throwbacks to leaner times.

In the survey, just 16% of boomers with both an IRA and an employer-sponsored plan like a 401(k) say they contribute to both. Meanwhile, 25% of Generation Y (boomer kids, ages 22-33) and 23% of Gen X (ages 34-47) contribute to both.

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One in four boomers say they have little or no confidence that they will have saved enough for retirement; 21% say they will have to work longer than they expected, according to the TD Ameritrade survey. Despite these grim numbers, just 45% of boomers say they would use a surprise $1 million gift to pay off debt and get their financial house in order.

What about their kids? Just 13% of Gen Y expects to work in their retirement years while 55% say they would use a surprise $1 million gift to get their finances under control. Gen X responds much the same way.

These results shouldn’t shock anyone. Studies show that our dominant beliefs about how society and the economy work, which directly impacts working, saving and spending habits, are formed before age 25. Boomer money mores were formed in the go-go years after World War II. Jobs and income were secure, as was the social safety net. Why save when pay kept going up and you had a soup-to-nuts pension plan?

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The shock of the last 12 years, when wages largely stalled, pensions eroded or disappeared and stocks and housing retrenched at the worst moment in the boomer lifecycle left many to struggle. They never planned for this. But the same forces that betrayed boomers in their pre-retirement years have left a deep and valuable impression on their kids, many of whom were traumatized by the sight of mom or dad losing their job and maybe the house. So, naturally, the kids are taking less for granted; they are acting more like their grandparents, who might squeeze a penny so tight that Lincoln’s face rubbed off.

In the long run, this period of economic upheaval will benefit Gen X and Gen Y. By saving seriously at a younger age, their money has more time to grow. Meanwhile, a recent study from fund company T. Rowe Price showed that those who are able to save consistently during a weak economy and retire in a strong economy enjoy a huge financial advantage over those whose fate it is to age in opposite economic climates. Those who save in difficult times and retire in good times tend to have double the nest egg at retirement.

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