An often-cited quote by Aristotle when discussing the younger generation is “They think they know everything, and are quite sure of it”, the less cited is the one from Socrates who said some 50 years earlier “The children now love luxury…they show disrespect for elders”. In philosophical terms, Socrates is Aristotle’s grandfather, and I can’t help but wonder what in 400 B.C. the equivalent of ‘OK Boomer’ would have been from Aristotle at the critique of his generation.
Fast-forwarding nearly 2,500 years, the current generational gripe is largely along the financial advantages afforded the elder generation and the spendthrift nature the younger generation is accused of.
A recent study done by the Institute of Fiscal Studies (Crawford, R & Sturrock, D ,2019, ‘Should generations differ in their wealth accumulation?’) looked at the drivers and implications of where this wealth inequality has arisen. The findings were as follows:
Effectively the younger generation does have more disposable income than previous generations, however the label of ‘spendthrifts’ does not seem to be born out as they tend to save more on average than previous generations. The issue lies in the fact that the average return they have got on these savings is far below that of previous generations and the amount of private wealth they will need in retirement is a lot higher.
Rather than continuing the argument that Socrates and Aristotle were having 2,500 years ago, from a financial planning perspective each of the generations could look to take the following actions to mitigate this financial inequality:
If all the above seems Greek to you (pun intended), then luckily our financial planners would be happy to discuss any of the above with you.
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