Investing.com — “Bank of America's internal credit card data shows that Gen X's spending has been weak compared to other generations”, said analysts at BofA Securities.
Gen X is an important segment of the US economy that is often overlooked. In addition to making up 27% of homes by 2022, they account for more than 33% of consumer spending, surpassing even Millennials.
As of August 2024, Gen X vision consumption has decreased by 2% year over year, indicating a significant change in behavior.
One of the main reasons for this decline is the growing amount of money spent at home on necessities.
These include housing, utilities, and insurance, often paid through non-card channels such as ACH and bill pay. As consumer spending continues to grow, it squeezes funds available for voluntary purchases.
Another important factor is Gen X's shift to saving and investing as they get older. BofA data shows that investments per Gen X household are 40% higher than the average for all generations, suggesting that many in this cohort prioritize long-term financial security over short-term spending.
This trend is especially strong for those approaching retirement, as more than one-third of Gen X plan to retire within the next 10 years, and many are increasing their contributions to 401(k) and other investment accounts.
Additionally, Gen X faces unique financial pressures from both ends of the performance spectrum. Often referred to as the “sandwich generation,” they are often responsible for supporting not only their aging parents but also their older children.
An increasing number of young adults aged 18 to 34 continue to live at home, and many rely on their parents for financial support. The US Census Bureau reports that 23% of 18- to 24-year-olds live at home, while the number of 25- to 34-year-olds doing the same has doubled since 1960, reaching 10% by 2023. .
This adds to the financial burden on Gen X households, and limits their ability to spend on non-essential items. While younger generations have seen strong income growth in recent years, helping to increase their perceived spending, Gen X is lagging behind.
BofA Securities data shows that their income growth is slower compared to Millennials and Gen Z, making it difficult for them to meet the rising cost of living while maintaining previous levels of discretionary spending.
However, despite this slow growth in wages, the cost-to-income ratio of Gen X has remained stable over the past few years, indicating that their reduced consumption may be a matter of choice rather than necessity.
Going forward, while Gen X may eventually benefit from “mass wealth transfer” as Baby Boomers drop billions of dollars in assets, those financial conditions are likely years away.
Meanwhile, financial pressures to support older and younger generations, combined with a focus on saving and investing for retirement, suggest that Gen X's reduced spending may continue for the foreseeable future.
