How to learn from money mistakes made by previous generations

Gen Z seeks financial advice from social media, millennials tend to rack up credit card debt, Gen X does not save enough for retirement and Baby Boomers are risk-averse, experts say

Learning from previous generations' money errors can help get your financial goals on track. Getty Images
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No matter your age, you can always learn from previous generations' money mistakes to help you make more prudent financial decisions.

Generation Z typically does not save early to benefit from the power of compounding interest, millennials tend to take on too much credit card debt, Generation X delays saving for retirement and Baby Boomers are said to be highly risk-averse, experts say.

An overwhelming 85 per cent of Americans admitted to having made mistakes with their finances over the past 10 years, according to a 2020 survey by bank comparison website Respondents said their worst financial mistake over the past 10 years was racking up credit card debt (23 per cent), followed by not saving enough for retirement (16 per cent) and spending beyond their means (16 per cent).

All generations agreed that racking up credit card debt was a major financial mistake, the survey found. About 26 per cent of Baby Boomers said their biggest financial regret of the past decade was not saving enough for retirement, while millennials admitted they were spending beyond their means, the study revealed.

“Some financial advice is not one size fits all,” says Vijay Valecha, chief investment officer at Century Financial.

“The best money moves for someone who has just got their first job won’t be the same as for someone who is ready to buy their first home or for one who is approaching retirement.”

We spoke to people representing Generation Z, millennials, Generation X and Baby Boomers to find out what they think are each generations' biggest money mistakes, while financial experts weigh in with their advice.

Generation Z

Zuha Khan, 17, an Indian student in the UAE, believes one of the biggest financial mistakes committed by millennials is being careless with credit cards.

“A majority of millennials struggle with credit card debt that they’re unable to pay at the end of the month,” she says. “Not only do the unpaid balances accumulate, but the interest charges incurred also make their situation worse. I would like to ensure that I pay my credit card bills in full each month and build a good credit score.”

Some millennials tend to fall into the trap of living in the moment and do not plan for the future, Ms Khan says. Other mistakes millennials make are not investing their money, falling for get-rich-quick schemes and making risky investments, the teenager says.

“It is very important that people save for emergency funds. Most millennials ignore its importance and end up in debt or having to pull from other savings accounts in the event of economic downturn or job loss,” she says.

Gen Z tends to procrastinate financially
Vijay Valecha, chief investment officer, Century Financial

What the financial experts say

Financial advisers say that Generation Z can be easily influenced by social media and some base their investment decisions on unqualified advice. Meme stocks and hashtags such as #FinTok on social media video platform TikTok are gaining in popularity among this generation.

“In the world of meme stocks with aggravated volatility, it is easy to act on advice that appears catchy, but the information provided may not always be accurate and may be painted with a rosy brush,” Mr Valecha says.

Members of Generation Z – widely referred to as Zoomers – also adopt a carefree approach to money and find themselves having to fix bad habits or play catch-up later when they peak in their career, according to experts.

“Gen Z tends to procrastinate financially. When they’re starting out in their careers and don’t have much money available, they tend to think waiting a few years when they’re older and have a higher earning potential would make saving less painful,” Mr Valecha says.

However, Francois Farjallah, head of Middle East and Turkey at private banking group EFG International, believes Generation Z is the most financially savvy of all generations, but they want everything.

“They want to have a business, income-generating real estate, cryptocurrencies and shares, among others. Wanting it all might actually be their mistake,” he says.


Generation X did not have a lot of savings, but instead were keen to invest in land and property for sentimental reasons, says Diana D’Souza, 40, a millennial who lives in Dubai.

“My parents always believed in living for the present day. They thought fixed deposits were the best way to save, whereas I believe the better way to save money is to live within one’s means,” Ms D’Souza says.

Generation X also did not understand the concept of having an emergency fund and saving for their children’s future education, she says.

“The life of Gen X was very simple while millennials are more ambitious and live in a competitive environment. So we have a bigger financial burden than our predecessors,” Ms D'Souza says.

What the financial experts say

EFG International's Mr Farjallah believes millennials ask for too much advice and support from Generation X.

Millennials’ biggest mistake is asking too much advice and support from Gen X
Francois Farjallah, head of Middle East and Turkey, EFG International

Aman Moti, meanwhile, a wealth adviser at Holborn Assets, says many millennials do not have an emergency fund in place. “It is of paramount importance to have at least six months’ worth of expenses in your bank account to account for unforeseen expenses or sudden loss of income,” he says.

Millennials are less likely than older generations to review their insurance coverage annually to ensure their health and life insurance is adequate if they face an unexpected situation, Mr Moti says.

They also tend to misuse credit cards and prefer risky investing, according to Mr Valecha.

“New apps and investment options are causing millennials to be impulsive about their investing,” Mr Valecha says.

“While a new app or up-and-coming cryptocurrency might sound promising, they could open you up to more risk than you can comfortably tolerate. Before putting money in the next big thing, figure out how much risk you’re willing to take on.”

Generation X

David Bell, 43, a British sales specialist at Microsoft, says one of the biggest financial mistakes made by Baby Boomers was putting too much cash in the bank. It is safe, but all the time that it is in there, it is losing value, says Mr Bell, who believes it is better to invest wisely in a diversified portfolio.

Another common error noticed by Mr Bell is that Baby Boomers tend to invest 100 per cent of their savings in real estate. “Property can be a good investment as a portion of your portfolio, but don’t put all your money into real estate,” he says. “Property investment in mature markets such as the UK and US can bring reasonable returns, however, there is the risk that it can be outpaced by inflation. In addition, markets can be volatile, remember the price crashes in the 1990s and 2000s.”

Other financial mistakes include relying on government pensions for income and not accounting for where they will retire and how that will affect their income, he says.

“Many governments are no longer in a position to pay pensions that would resemble a living wage as the cost of living has risen faster than governments have raised pension pay-outs. Many Boomers find themselves having to supplement their incomes through part-time jobs or rely on younger family members.”

Other typical financial mistakes made by Boomers include relying on state/government pensions for income
David Bell, Gen Xer in Dubai

What the financial experts say

Generation X’s biggest mistake is worrying too much about providing a good financial future for their millennial and Generation Z kids, when in reality they are most likely to make more money faster than their parents, Mr Farjallah says.

“To a certain extent, Gen X were also slow in accepting environmental, social and governance-driven investments.”

Generation X has a tendency to delay saving for their retirement, Mr Valecha says. “Gen X investors are so caught up building a secure future for their children or building a second home that they usually haven’t saved sufficiently for their retirement and start making catch-up contributions to their retirement accounts that often becomes a financial burden to accumulate large amounts in a limited time period.”

This generation is also not prepared for the unexpected, he says. Generation X investors have worked hard to build a smart saving and investing strategy, but unexpected events such as an illness or job loss can derail their future if they are not prepared.

“They usually make little effort to protect their assets with the right insurance coverage and tend to have a lower cash reserve to give flexibility to handle whatever comes their way,” Mr Valecha says.

Baby Boomers

The biggest mistake of the Silent Generation, those born from 1928 to 1945, was not to save for their children’s education, according to Arun Mamtani, a 63-year-old Baby Boomer.

“My granddaughter is only two years and I am already planning to secure her financial future until she is in her mid-20s,” says the chief financial officer of a UAE-based business conglomerate.

“I could not go for higher studies because my father never prioritised saving for my higher education. Their main priority was to invest in property to settle in after retirement. For our generation, children’s education is the first priority,” the Indian expat says.

The Silent Generation did not know the concept of an emergency fund and mostly took out loans against their provident funds (government-managed retirement savings scheme) in case of a fund crunch, he says.

What the financial experts say

“Baby Boomers’ biggest mistake is failing to understand and invest in blockchain and cryptocurrencies,” Mr Farjallah says.

Baby Boomers also tend to be more laid back about checking their asset allocation and withdrawal strategy regularly after retirement, according to Mr Valecha.

“With equity markets continuing to post new records, there is a good chance their equity-to-fixed-income ratio is improper. It is important to rebalance to an appropriate allocation based on their risk tolerance and financial goals,” he says.

Baby Boomers are also considered too risk averse. While it is recommended that Baby Boomers should invest more conservatively because they have less time to recover from market downturns, they can consider shifting their investment portfolio so that inflation does not dent their future purchasing power, Mr Valecha says.

“Growing life expectancies means retirement could last 30 to 40 years. Baby Boomers do not consider maintaining some exposure to growth-oriented investments to help their money last longer,” he says.

Updated: August 31, 2021, 5:00 AM