Bank of America Data Shows Weakness in Gen X Discretionary Spending
In a recent report, analysts from BofA Securities revealed that Gen X discretionary spending has been lagging behind other generations, with a 2% year-over-year decline in August 2024. This shift in behavior is primarily driven by an increase in necessity spending, such as housing, utilities, and insurance, which leaves less room for non-essential purchases made with credit cards.
Furthermore, Gen X is prioritizing saving and investing as they age, with investments per household 40% higher than the average across all generations. This trend is especially strong among those nearing retirement, as they prepare for financial security in their golden years.
However, Gen X faces unique financial challenges, being squeezed by both aging parents and adult children who rely on their support. This added financial burden, coupled with slower wage growth compared to Millennials and Gen Z, has led to a reduction in discretionary spending among Gen X.
Looking ahead, while Gen X may eventually benefit from the transfer of wealth from Baby Boomers, the financial pressures of supporting multiple generations and focusing on retirement savings suggest that their reduced spending habits may persist for the foreseeable future.
Analysis: Gen X is facing a financial squeeze due to increased necessity spending, slower wage growth, and the responsibility of supporting both aging parents and adult children. As a result, their discretionary spending has declined, impacting their ability to make non-essential purchases. This trend is likely to continue in the coming years as Gen X navigates the complexities of intergenerational financial support and retirement planning.
