The generation gap: How can financial planning help you?

It should come as no surprise that wealth and financial challenges differ vastly between generations. After all, you hope to accumulate wealth during your working life to support you through retirement. A new discussion paper from the Financial Conduct Authority (FCA), highlights intergenerational wealth differences and how financial advice can add value at different points.

Overall, the paper, which looked at the Office of National Statistics Wealth and Assets Survey, found that total wealth was less than that compared to individuals of the same age ten years earlier. In contrast, those around retirement age have a greater level of wealth. As a result, different financial strategies are essential, the same products may even be used to serve different purposes to suit financial needs across generations. Take mortgages, for example:

  • A few decades ago, people were buying property in their mid-20s, as a result, many that are part of Generation X is working towards paying off a mortgage before they reach retirement age
  • Millennials are, on average, taking the step of buying a property for the first time five years later. This means mortgage terms are increasingly likely to surpass traditional retirement age
  • In comparison, baby boomers are far more likely to be considering mortgage-type products to access property wealth to maintain their lifestyle in retirement

Whilst all three generations may be using or considering mortgage products, the challenges of doing so and the reasons behind the decision are very different.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said: “From baby boomers to Generation X to millennials – everyone’s financial needs and circumstances are evolving. It is clear each generation will have its challenges.”

So, how can financial planning help these three generations tackle the challenges they face?

Baby boomers

For baby boomers, the paper highlighted a key issue that links to several factors: managing wealth throughout retirement.

Growing wealth among those in retirement means this generation is wealthier than previous generations, but they also have more responsibility. Baby boomers are the first generation that has been able to access their pension flexibly, altering withdrawals to suit their lifestyle. On top of this, longer lives mean pensions need to go further and there’s uncertainty around potential costs of care in later life.

Despite this, just half of those nearing retirement have given a great deal of thought to how they will manage financially in retirement.

Financial planning can help baby boomers understand the assets that can provide an income in retirement, from pensions to property, and how long they’ll last if the lifestyle is maintained. It can also help answer questions such as:

  • How long would my pension last if outgoings were to increase during the first five years of retirement?
  • Will I have enough to cover the cost of care if it’s needed?
  • What’s the best way to access pensions to reduce tax liability?

Retirement is often a time that’s associated with more freedom. However, financially, it can feel uncertain. Financial planning can provide confidence in decisions and lifestyle choices.

Generation X

Generation X typically has a higher than average income. But multiple pressures mean incomes are still stretched. Some within this generation are finding they’re financially supporting both the older generation with outgoings in later life, as well as the younger generation trying to find their feet. As a result, despite higher income, Generation X has lower than average cash savings and the highest amount of unsecured debt excluding student loans.

As Generation X isn’t putting as much aside for their pension as they should be or saving for financial emergencies, it leaves them vulnerable to financial shocks.

With income feeling like it’s stretched, it may feel like financial planning has little to offer at this stage. But it should be seen as an opportunity to add far more value. Generation X is likely to face conflicting financial decisions; should you use any spare money to overpay the mortgage, place it into a pension or add to a cash savings account? Financial planning can help highlight how different decisions will have an impact in the short, medium and long term with an individual’s aspirations in mind.

On top of this, getting the most out of money if there’s little leftover at the end of each month is crucial, it could have a big impact on long-term financial wealth. Again, this is an area that financial planning can help with.


Millennials are struggling to reach traditional milestones due to a combination of reasons, including insecure employment, house prices and student debt. They are also the generation that’s most likely to be affected by poor wage growth since the 2008 financial crisis. Compared to those the same age ten years ago, millennials are earning less in real terms. As a result, it’s not surprising they’re facing difficulties in building wealth.

Much like Generation Z, millennials are often contending with conflicting financial decisions; is it better to stop pension contributions temporarily to build up a deposit that allows them to step on the property ladder quicker, for example?

Financial planning at a younger age can help set the right foundations for building financial wealth. When facing income challenges, it can seem like it will make little difference overall but even a small financial change can lead to improved financial wellbeing over the long term.