The generations financial goals differ and how to achieve them

New research by AJ Bell explores the top financial goals at each stage in life and found that for Gen Z, Millennials and Gen X, the top three financial goals are retirement savings, money for travel and building an emergency fund.

Among those aged 61 and under, the older you are, the more likely you are to prioritise retirement savings (31% for Gen Z, 47% for Millennials and 51% of Gen X). Meanwhile for those aged 62 and over (Baby Boomers and the Silent Generation), the main goal is saving for travel, but significant numbers of both groups have no financial goals at all (32% of Boomers and 49% of the Silent Generation). 

Some financial goals dominate our working lives, so among every generation under the age of 62, having enough money for retirement is the key priority. This is followed by building a pot for travel and saving for emergencies. However, as we go through our lives, some goals become far more pressing than others.

Gen Z goals (Age 18–29)

Going into each group in more detail and starting with the youngest group currently, Gen Z is starting out in adult life, which involves a huge tension between the money we have available as we start our careers and the enormous number of goals we’re striving towards. At this time in your life, it’s vital that you budget for what’s next and do your best to stick to it. This gives you a far better chance of having some money left over to put into savings or investments for the long term.

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Gen Z is far more likely than any other age group to say they are funding education or paying off a student loan. However, once this generation has finished studying, buying a home can loom into focus too. Some 23% of Gen Z say saving for a property is a priority, which falls to 17% for Millennials, and is much lower for other age groups.

Meanwhile, older cohorts of this generation might be looking ahead to starting a family. Saving to start a family is a priority for 20% of Gen Z, 10% for Millennials, and negligible for everyone else.

Millennial goals (Age 30–45)

Moving up to Millennials, who are covering their 30s to mid-40s, and for those who have children, the demands of the whole family will drive their priorities. This is the generation most likely to say that saving for their children’s futures is one of their key considerations, at 27% (compared to 16% for Gen X and 13% for Gen Z).

Having a family may also spark a change in property needs. Millennials are often saving for home improvements (27%), as their expanding family demands more space. Others have traded up and taken on a larger mortgage, which is one reason why Millennials are also keen to pay off the mortgage (19%). It’s worth thinking carefully before taking this approach though. 

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While this is a major outgoing, the interest rates are far lower than short term unsecured lending, and if you focus too much on repaying your mortgage, there’s a risk you neglect other long-term priorities.
 
Those who have children face enormous demands on their income for day-to-day spending, so it’s particularly challenging to put money away for their goals. Understanding the support you can get with childcare can make a big difference, so check what’s available and how to make the most of it, so you can keep as much as possible aside for saving and investing.

Gen X goals (Age 46-61)

Once you hit your forties and fifties, you may start to think properly about your retirement plans, how much you might need and whether you’re on track for the living standard you hope for when you retire. Gen X are the generation most likely to be saving for retirement, with just over half (51%) stating this as a priority.

Getting to grips with your pensions and consolidating them into one single pot could prove a shrewd step in the remaining years before you retire, as you could benefit from lower charges and compound investment growth on a larger amount that will leave you better off over time.

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Gen X are also most likely to prioritise paying off unsecured debts (14%). This could partly be because at these ages, people often see their earnings hit a peak, and the more people earn, the more we tend to borrow. This should be a key goal for anyone carrying large and expensive debts. However, you need to be honest with yourself before focusing on this at the expense of everything else. If you’re likely to keep borrowing, you can’t use this as an excuse to neglect saving and investing for the future.

Baby Boomer goals (Age 62–80)

A quarter of Boomers say they focused on building an emergency fund, which is eminently sensible. While we’re working age we should be working towards having enough emergency savings to cover three to six months’ worth of essential spending in an easily accessible account. Once we have retired, this should be closer to one to three years’ worth, because it’s important to have more flexibility when we’re on a lower, fixed income.

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Boomers are significantly more likely than anyone else to be saving for end-of-life concerns, like care and funerals. For younger generations, other things feel more pressing, while for older generations it may feel too late. Saving to leave an inheritance becomes much more of a financial goal too – named by 16% of Boomers.

If you haven’t already, it’s crucial you write a will, and consider putting in place a lasting power of attorney. Ensuring you have everything in place for your loved ones in the event you’re unable to manage your affairs, or pass away, will save significant distress both emotionally and financially for them and ensure your wishes are followed.

Silent Generation goals (Age 81+)

The older we are, the more likely we are to say we don’t have any financial goals – including almost half of the Silent generation. This could be after retirement, when people have moved from accumulating money to spending it, so they don’t think in terms of saving any more.

However, it’s never too late to plan ahead. There are plenty of people investing over the age of 100, and while they may not have the time horizon for investments during their own lifetime, there’s every chance they eventually leave their investments to a beneficiary in their will. 

If you’re at all unsure about the best approach, it may be worth speaking with a regulated financial adviser at this point so you and your family can make the most of the money you’ve built up.”

While all members of one generations may share some or all of the goals associated with their cohort, or maybe some from another, all of them have the ability to achieve them with some thoughtful planning.

1.    Do some financial multi-tasking. In the early stages of life, you’ll have a number of competing savings priorities, including an emergency fund, a property deposit and retirement income for the long term. It makes sense to put something towards all of your goals rather than focusing on one entirely and neglecting the rest.

2.    Consider the right home for your money. For short-term goals, like an emergency fund or saving for a holiday, cash savings are often the most sensible option. However, as soon as you are looking ahead 5-10 years or more, then Stocks and Shares ISAs should be a consideration, because they offer far more potential growth for the long term. Investment is also a no brainer for retirement, given the timescales involved. This should include a pension because of the exceptional tax breaks on offer, but can also include Stocks and Shares ISAs to provide some extra flexibility. For those saving for a property, a Lifetime ISA is worth considering, because you will also get a government bonus of up to £1,000 a year to add to your deposit.

3.    Look ahead. The longer you can work towards a goal, the easier it is to hit it. We know that as you get older, your pension will be more of a priority. However, if you do whatever you can afford, as soon as you can afford to do so, by the time you hit your 40s and 50s you stand a decent chance of being well on track already.

4.    Don’t wait for the perfect moment to act. It’s clear that every stage in life comes with its own pressures. If you think the moment to sort your pension will present itself when things calm down a bit, remember that things are unlikely to ever be completely calm. The perfect moment to make a start on any financial plan is today.

5.    Don’t write off the benefits of saving and investing as you get older. Baby Boomers and the Silent Generation often say they have no financial goals, but it’s never too late. Whether you’re investing to build a pot for care needs in your 90s and beyond, or to give your grandchildren a head start in life, there’s plenty more your money can achieve.