Feature Story – Shifts in financial habits

The More Things Change…The More We Spend The Same

By Alexis Captain Marino

It’s the beginning of a new year, a time when people make resolutions. Many of those resolutions involve money in some sort of way – whether it’s to save more or spend less – most of us resolve just to have it. So, how have savings, spending and investing changed with each drop of the new year ball?

Edward Jones financial advisor Andre Hebert says spending habits haven’t seen a dramatic shift in what people buy. “People still allocate their funds to meet essential needs,” he tells us. “But the game-changer is inflation.” Today, the rising cost of goods and increased living costs have prompted individuals to reconsider their money management strategies. With uncertainties around Social Security coverage, retirees now find themselves reevaluating retirement plans and adjusting their withdrawal amounts. “It’s not about changing habits but adapting to the changing financial tides.”

When it comes to saving money, however, there is a fascinating trend, especially among millennials and Gen Z. Hebert sheds some insight on this. “Contrary to the free-spending reputation of younger generations, millennials and Gen Z are flipping the script. The sub-40 crowd from 20 or 30 years ago was spending more. Today’s sub-40s witnessed the aftermath of the dot-com bubbles, 9/11, and the 2008 financial crisis, leaving a lasting impression.” Hebert concludes that these individuals are now prioritizing savings, contributing more to IRAs, and embracing financial education, signifying a growing awareness of the importance of financial preparedness.

This financial preparedness is also evident in where people are investing their money. “While investment types haven’t undergone a significant overhaul, there’s a shift in focus,” says Hebert. Recently, Hebert has noticed his clients are increasingly curious about Roth conversions and diverse account contributions. “It’s not about abandoning traditional investment avenues. People will always contribute to their 401k, but now the conversation has shifted to exploring different strategies from a financial planning standpoint.”

One notable change is the resurgence of fixed-rate income investing. Historically low interest rates for CDs, Treasuries and bonds over the past decade are on the rise again. Hebert sees this as an opportunity for clients to diversify and reduce risk. “Instead of relying on stocks to provide income, now you can take the risk off the table and lock in favorable fixed rates.” Hebert says more stable and efficient options like CDs and Treasury provide a sense of security, keep things easy, and reduce stress.

Perhaps the most profound change Hebert has observed is the mental shift in approaching finances. “Thirty, forty years ago, living costs were manageable. Expectations were possible. You could own a home, have a family, send your kids to private schools, take trips to Disney World. But today, things are tight,” he laments. “The rising cost of living, education, and uncertainty around life expectations have created challenges and disruptions. The younger generation is facing tough decisions about starting families, buying a home, sending kids to private school or college.” However, Hebert points out the generational shift in planning future finances. “What I am happy about is that the younger generation is making a concerted effort to contribute to their financial future. They realize it’s something they have to do, that it’s not up for debate. They may not get to take that trip or have to choose between going to college or not, but contributing to financial security is a must.”

While basic spending, saving and investing habits remain relatively constant, the focus and priorities tend to change with the economic landscape. So make your money resolution, just as you would at the start of any new year, keeping your financial future in clear view.