Today we delve into the saving, spending, and investment habits of two very different generations and how they impact wealth creation and creditworthiness. Boomers were born between 1946 and 1964 and are currently between 57-75 years old, while Gen Y or millennials, born between 1981 and 1996, are between 25 to 40 years old. Here's a peek into their financial patterns.
A Shift in Saving Trends
By and large, boomers grew up in a culture where savings were prioritized. It was probably easier, too, as this was a pre-liberalisation generation where the retail markets offered fewer options and temptations to consumers. On the other hand, millennials were the first to grow up in the Internet and social media age, which opened the doors to online shopping and apps. With temptation available at the click of a button, the practice of saving gave way to attractions like retail therapy and online shopping.
Investments: Then and Now
Boomers bet on instruments like real estate, gold, and fixed deposits. Real estate was not as competitively priced and overvalued as today, and fixed deposit interest rates were higher.
On the other hand, millennials have access to more financial literacy than before. Coupled with easy-to-access digital investing platforms, they prefer to invest in stock markets, mutual funds, and cryptocurrency. They are also more likely to invest in traditional instruments such as PPFs if accessible online easily.
While your banker or traditional print was a critical touchpoint for accessing financial information earlier, millennials today tend to consume advice and information from online communities, YouTube videos, podcasts, blogs, and articles thrown up in online searches. Social influencers also play a crucial role, with everyone having their favourites whom they tend to follow regularly.
Borrowing: Then and Now
Boomers were a loan-shy generation. They would usually spend much of their lives saving to buy a home and then take a loan to cover the remaining amount. On the other hand, the millennial generation is more likely to take a loan for education. It could be to study abroad or for degrees such as an MBA or engineering. They also tend to take small-sized consumer loans to buy the latest gadgets. This means that millennials begin their credit journey much earlier than boomers. They may start before they even secure their first jobs.
Leveraging Credit Cards
The market is flooded with a slew of credit cards today. Having a disposable income makes one more likely to secure a credit card easily. A credit card comes with an opportunity to earn rewards, cashback, and other perks. Earlier, upper-middle-class consumers used credit cards primarily for dinners and the purchase of high-cost appliances. Today, millennials use them for almost everything - online shopping, ordering food and groceries, buying gadgets, appliances, cars, vacations, and other consumables. Their credit card usage and repayment pattern influence their credit score.
A Common Thread Connecting Two Generations
Here is where it gets interesting. While both generations' spending and earning styles have shifted drastically, one behaviour is typical for both in our country. Boomers and millennials have not developed the culture of checking their credit scores and building a detailed plan to raise those scores.
Your credit score is a metric that assesses and reflects your creditworthiness, making you eligible for higher-value financial products, lower interest rates, and better credit deals overall. Credit bureaus calculate your credit score by considering factors such as credit history and repayment patterns.
A credit score ranges from 300 and 900. Boomers are more likely to have a credit score already. However, they need to keep checking it regularly even if they are satisfied with their current score. On the other hand, many millennials could be just starting their credit journey and need to be aware of specific pointers while improving their scores. Let's take a look at some of them in the next section.
How to Ensure You Are Creditworthy, Always!
While boomers have had fewer opportunities to build their credit scores, millennials have time on their side and more opportunities to grow their credit scores. This can be actively done by owning a credit card, taking a loan, or accessing some form of credit that enables you to demonstrate positive credit behaviour and build up your credit score. This empowers you to reap the benefits when you need to borrow in the future.
Try to optimise credit card usage for key spends, ensure you make repayments on time, and leverage all the rewards and benefits that come with it.
Irrespective of their current financial stage, everyone should regularly check their credit score, track/improve it and build it if they don’t have one. While today, there are several platforms and apps on which you can check your credit score, the OneScore app is one platform that lets you check your credit score for free and gives you personalised insights on how to improve/maintain your credit score. For those of you who do not have a credit score yet, OneScore has developed an AI-powered score simulator that guides you on how to start building your score from scratch. All this, without ads or marketing calls. In short, using technology, the OneScore app guides you to become financially savvy and build a healthier relationship with credit, which will open doors to better credit opportunities in the future.
To sum it up, whether you are a Boomer or a Millennial, monitor your credit score regularly and ask your friends, #ScoreDekhaKya and don’t forget to download the OneScore app.
For more articles, information and tips, visit our page ScoreDekhaKya.
Moneycontrol journalists are not involved in the creation of the article.
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