How to learn from money mistakes made by previous generations

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 DepositAccounts.com. 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.

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.

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.