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Most Baby Boomers think that people at an early age tend to spend money more than their income for education or buying their first house. In middle age, they will start saving money to use in their retirement and once they retire, they will sell assets for a living. When this generation is in their retirement, they will have to face a high interest rate and inflation as a result of the increased demand that causes inflation from the free-spending of these generations.
Looking at the example of Italy and Japan which are countries full of elderly populations, inflation, and interest rates have remained low for many years.
A study by two economists, Yoko Niimi, and Charles Horioka, showed that the Japanese elderly spend only 1-3% of their wealth per year, meaning many people have left along with a lot of wealth.
In Italy, a study by Luigi Ventura and Horioka also found that 40% of retired elderly people continue to accumulate wealth.
As a result, investors view Baby Boomers as those who like to save money rather than spend money wastefully. Some Baby Boomers also choose to reduce their house size and use the remaining money to spend on other things in their lives. Why do Baby Boomers spend so little money?
That is because Baby Boomers are hesitant to spend their savings to the fullest extent and the causes of this may be causes by three main factors:
This generation feels they are lucky to be able to save money and become wealthy, so they want to pass on the wealth to their children who may have a hard time making money for home buying and tuition. According to the data, the money flow from the dead that is passed on to the living is higher in rich countries. For example, in the United States, the inheritance every year is 50% more than it was in the 1980s and 1990s.
Since Covid in the past few years, people’s behavior has changed. The Baby Boomers eat out less than before Covid. As well as spending less to buy experiences after COVID-19, causing the spending significantly lower than before.
With advanced technology causing people to live longer than in the past, some Baby Boomers may live over 100 years, which means they will have to live a long retirement life. This may become a financial burden in the future after retirement, especially for those who need 24-hour care. According to the survey, the proportion of Americans who are confident that they have enough savings for retirement dropped from 40% in the mid-2000s to only 30% because of the rising cost of inflation.
Although Baby Boomers in wealthy countries have high wealth and focus on saving for the future, what economists predict will affect the economy and market growth may no longer be the same as before.
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