The Younger You Are the More You Know About Money — And You Have Baby Boomers To Thank

An interesting trend has emerged in the personal finance space — the younger you are, the more likely you are to know about money, and you likely have your parents to thank. 

Millennials and Gen Z display a more profound understanding of money than their older counterparts, and new studies say it's due to an increase in family discussions around personal finances. In fact, baby boomers are thought to be the generation that helped improve the overall education of finances in multiple generations who make it a focus today. This has led to a higher growth of wealth than in previous generations.

The younger you are, the more you know about money

Contrary to conventional wisdom that associates financial acumen with age and experience, recent studies suggest a reverse correlation. A recent survey and report from Forbes Advisor shows that nearly three-quarters of millennials, born between 1981 and 1996, grew up in families that regularly discussed money. 

In stark contrast, only 41% of baby boomers recall talking to their parents about personal finances when they were younger. That's a significant increase in a single generation, driven by baby boomers who wanted their kids to be better off with money than they were. This has created a potential trickle-down as Gen Z has had even more opportunities to learn about money than their parents did. 

Money comparison by generations

Analyzing the financial landscape through a generational lens reveals intriguing patterns. Millennials, born between 1981 and 1996, and Gen Z, born between 1997 and 2012, exhibit a heightened awareness of financial concepts, including budgeting, investing, and debt management. 

In contrast, Baby Boomers, born between 1946 and 1964, and Gen X, born between 1965 and 1980, often trailed in this financial knowledge. As money became more and more important after the great depression era, this might explain why they started to teach their kids about finances more than any generation had previously.

The Forbes poll, which was conducted in September and polled 2,000 adults, also found that baby boomers were the least likely to come from families that discussed finance, followed by Generation Z (55%), Generation X (57%,) and millennials (73%).

Baby Boomers started money education

While baby boomers have been criticized for various economic impacts, they undeniably excelled in initiating conversations about money within their families. Unlike preceding generations, baby boomers recognized the importance of financial education and made a conscious effort to impart money management skills to their children.

Professor of multinational management at the Wharton School of the University of Pennsylvania Mauro Guillen says this is likely because those parents generally did not discuss money with their children "just as they shielded their progeny from the horrors of war and the scourge of poverty." 

Baby boomers mostly grew up in households with parents of the Greatest and Silent Generation, born between 1901 and 1945. Having navigated economic shifts and financial challenges, baby boomers sought to equip their offspring with tools to make informed financial decisions their parents did not give them.

What this means for future generations

The lessons created a ripple effect, potentially breaking the cycle of financial illiteracy that may have persisted in earlier generations. Armed with an early understanding of money matters, future generations are better poised to tackle challenges such as student loan debt, homeownership, and retirement planning. This can lead to a boost in bank accounts for future generations.

Moreover, boomers hold nearly $80 trillion in assets, the transfer of which is anticipated to go to their offspring. Millennials stand to receive one of the largest wealth transfers in history and are more prepared than earlier generations to handle the task. This also implies that millennials might be among the wealthiest generations in recent history, partly due to their parents’ insistence on financial education.

Additionally, the advent of technology and the accessibility of information have played a crucial role in enhancing financial literacy, and eliminating money stress, among the younger demographic. Millennials and Gen Z, accustomed to the digital age, leverage online resources, apps, and platforms to deepen their financial understanding, supplementing the foundational knowledge passed down by baby boomers. 

Bottom line

The surprising correlation between age and financial literacy challenges stereotypes and underscores the positive impact of baby boomers on shaping the financial knowledge of younger generations. While societal and technological factors contribute to this shift, baby boomers' conscious effort to educate their children about money has undoubtedly played a significant role.

As we look toward the future, the financial landscape appears promising, with a well-equipped generation able to navigate the intricacies of personal finance. By acknowledging and appreciating the strides made in financial education, we recognize that baby boomers, often criticized for various economic shifts, have left a lasting legacy in an unexpected realm — fostering financial literacy for future generations.