Similar to the baby boom generation, members of generations X & Y have financial priorities that include home ownership, funding college education and saving and investing for retirement. Achieving these goals requires a different approach to developing and implementing a financial plan that resonates with generations X & Y.
Born into a complex and fast-changing world
The pace of change in the world today compared to a generation or two ago can be illustrated by the speed of adoption of new technologies. In 2003, Apple launched iTunes1 and after only five months, 10 million songs had been downloaded. Just over a year later the total was 200 million songs. By February 2010, a period of less than seven years, more than 10 billion songs had been downloaded through iTunes alone. Compare this with the relatively stable 400 to 500 million albums (including vinyl, 8-track, cassette and CD formats) sold each year throughout the 1970s and 1980s through all retail channels.2
While prices on some consumer items are in decline, the cost-of living is increasing
Despite a huge increase in sales volume, overall revenue from U.S. music sales fell by almost 57% between 1999 and 2009.3 Prices for technology hardware and software have also dropped considerably in recent decades. But as the price of hardware and software has fallen, the cost of many basic needs of generations X and Y have increased, often at a pace well above inflation. For example, the cost of purchasing a home in the U.S. has risen between the mid-1980s and 2013 by about 19% in terms of the average household income. During this period, average home prices have more than doubled on average in many major urban areas, a pace much higher than the increase in income. This increase is actually down from almost three and half times the price during the bubble which peaked in 2006. Some urban areas, such as San Francisco and Los Angeles have seen house prices increase to more than triple during this period ending in 20134. The increase in the cost of living, compared to what baby boomers experienced, will be one of the key factors that dramatically challenge the ability of generations X and Y to achieve their goals, unless they make the changes necessary to deal with this new reality.
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How generations x & y see the world
Stereotypes perpetrated by baby boomers, people born between 1946 and 1964 — and by generations X and Y themselves — don’t acknowledge just how similar these generations are. Generation Y (also known as the millennials) is largely perceived by other generations to be independent, confident, obsessed by social media, cynical and impatient, while generation Xers are thought to be self-confident and demanding to have their opinions heard. This is in sharp contrast with the way that baby boomers are perceived. Baby boomers are considered to be loyal and committed team players who help to drive change over the long term within their organizations, although they are seen as less technological savvy than generations X and Y. Despite these widely differing perceptions, the generations have much in common.5
Both of these generations have felt the impact of the demise of the traditional two married parent family. Between 1980 and 2012 the percentage of children who lived with two married parents has dropped from 77% to 64%.9 Many families now have both parents working outside the home, increasing the number of latch-key kids. The economic boom-and-bust cycles have had major implications for their employment opportunities. All of these events have affected how these generations feel about the world around them and their ability to move forward.
1 iPod + iTunes Timeline. Apple Press Info (2013). (accessed November 26, 2013)
2 The history of recording industry sales, 1973-2010 (2011). (accessed November 26, 2013)
3 Music’s lost decade: Sales cut in half. Goldman, David (2010). (accessed November 26, 2013)
4 Reality check: The Economist index of US house prices (accessed December 19, 2013)
5 The Dynamics of a Multigenerational Classroom and Clinical Environment.
DiGiacinto, Dora (2010). (accessed December 19, 2013)
6 The end point of generation X is subject to variation between 1979 and 1981, depending on the source referenced.
7 Generations in the Workplace in the United States & Canada. Catalyst (2012), (accessed December 19, 2013)
8 Sources generally agree about the timing of the birth of generation Y, although its starting point varies between 1980 and 1982 depending on the source referenced.
9 Family Structure and Children’s Living Arrangements (2013) ChildStats.gov (accessed December 19, 2013)
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BMO Wealth Institute, a unit of BMO Financial Group, provides this commentary to clients for informational purposes only. The comments included in this document are general in nature and should not be construed as legal, tax or financial advice to any party. Particular investments or financial plans should be evaluated relative to each individual, and professional advice should be obtained with respect to any circumstance.