What Does ‘Financial Freedom’ Actually Mean for Gen X, Baby Boomers, Millennials and Gen Z
What is financial freedom? While for some, it could mean being able to navigate life without money being a cause of stress, for others, it could mean being able to retire early or not caring about (over)spending.
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And as Capital One noted, financial freedom is sometimes used interchangeably with financial independence.
“In general, achieving financial freedom means living comfortably without money-related stress,” it added.
In fact, a recent Experian survey found that while there’s a broad common definition, what being financially free not only varies by generation, but is defined with much more modest terms than generally accepted.
Christina Roman, consumer education and advocacy manager with Experian, said there’s a general misconception that financial freedom means living comfortably without worry.
“While that could be the definition for some, generally, financial freedom means different things to different people. Based on Experian’s survey, some of the themes used to describe financial freedom are humbler than you’d expect,” she said. “The most common definitions include not having debt, having a substantial emergency fund and being able to pay current bills for six months without worry.”
The survey also found that half of Americans don’t feel “financially free, with 48% of adults feeling somewhat or very financially restricted and only 33% feeling somewhat or very financially free.
According to Roman, beyond some of the more notable macroeconomic factors, the most significant driver of consumers feeling financially restricted is that they simply don’t know where to begin.
“The financial system is complex and it’s very easy to get overwhelmed, especially if you feel like you’re falling further into debt or don’t have a financial gameplan,” added Roman.
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What Does Financial Freedom Mean for Different Generations?
According to the survey, the generation’s views on the concept of having financial freedom in their lives vary greatly.
While older generations – silent, boomers, Gen X – equate the concept of financial freedom with being debt-free or having money reserves for emergencies, that’s not how younger generations view it.
Indeed, overall, for more than half of adults – 54% – it means not having debt, with 72% for the silent generation; 64% for boomers; 54% for Gen Xers; and 44% for millennials.
On the other hand, for Gen Zers, financial freedom means paying their current bills for six months without worry, 37%. Meanwhile, 36% of millennials agreed with this notion.
What are the Drivers of the Generational Differences?
Some of the differences across generations can likely be attributed to experience and their current financial situation, as people tend to identify and manage the issues right in front of them, said Roman.
‘For instance, a lot of individuals from older generations may already have a mortgage or other personal loans, and are setting themselves up for retirement, hence the need to pay down existing debt,” she said.
On the other hand, she added that younger consumers still have goals and aspirations, yet are struggling with a higher cost of goods and rent.
Gen Z is Most Optimistic About Their Financial Future.
Another interesting survey finding is that Gen Z adults are the most optimistic consumers, with half believing they will become financially free.
As Roman noted, many younger consumers recognize that their prime earning years are still ahead of them and believe that increasing their financial knowledge will set them up for future success.
“For instance, 39% of Gen Z respondents believe understanding how to grow their wealth will help them become more financially free, while 33% believe better overall financial education will have a positive impact,” she added.
How Can Consumers be “Financially Free?” Is Achieving This Different Across Generations?
Once you know what this means for you, can you create a plan of action and work toward that goal, said Roman, noting, however, that while financial freedom is attainable, it won’t happen overnight.
“You have to be patient,” she added.
Yet, there are initial steps that consumers can take to become financially free, said Roman.
First, establish a realistic budget – and while it’s a basic concept, creating a budget is an extremely important part of managing your finances.
Then, identify needs versus wants. In other words, cutting back on non-essential expenses can potentially save you hundreds of dollars a month.
“They can use some of that extra cash toward paying down some existing debt, as well as putting it toward emergency funds, savings and retirement accounts,” she said.
In addition, learn how to use credit as a tool, as having good credit can help you qualify for lower rates and better loan terms.
Finally, expand your financial knowledge and literacy.
“Learning basic financial concepts, such as building and maintaining good credit and budgeting and saving, can better position consumers for financial success,” added Roman.
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This article originally appeared on GOBankingRates.com: What Does ‘Financial Freedom’ Actually Mean for Gen X, Baby Boomers, Millennials and Gen Z
