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Scoring the generations for financial fitness

Economy grew faster in Q1, and other MoneyWat... 01:05

Chalk one up for the baby boom generation. While much has been made in recent years about their financial woes, it appears they're in somewhat better shape than those in the Gen X camp or millennials. Yet all three generations have major money-related shortcomings.

On a 10-point scale, boomers -- those age 55 and older -- had an average financial-wellness score of 5.7 in a generational research study released this week by Financial Finesse, a financial education company that specializes in workplace programs.

Gen Xers scored 4.8, and millennials came in last at 4.4, according to the study. Its findings are based on an analysis of assessments completed by more than 35,000 employees in 2014 and 2015.

Financial Finesse defines "financial wellness" as a state of financial well-being whereby employees have minimal financial stress, a strong financial foundation and plan in place to achieve key money-related goals.

It's hardly surprising that boomers are better off than subsequent generations given they've had many more years to amass wealth and learn financial skills. They also came of age during a decades-long stretch of economic prosperity and rising stock prices. Some 84 percent of boomers own a home, and 23 percent earn between $100,000 and $150,000 a year, according to the study.

Among all three generations, boomers were the most likely to have run a retirement calculator and have basic investment knowledge. But they still face significant financial hurdles.

Half of the boomers who participated in the study don't know whether they're on track to retire comfortably, and, like Gen Xers and millennials, boomers are having a harder time these days paying off debt. The study found that the percentage of boomers who have a plan to pay off their debt fell to 58 percent in 2015, from 64 percent 2014.

Many boomers are stretched thin because they're helping children and grandchildren while also caring for aging parents. About 25 percent of boomers, a group called the Sandwich Generation, were contributing to college savings accounts in 2015, up from 20 percent the prior year, according to the study.

"It's a good thing to help your kids, but not if it's to your detriment," said Erik Carter, a certified financial planner and lead author of the study.

"There's no financial aid for retirement," quipped Carter, adding that boomers ought to make themselves a priority from a financial perspective.

Members of Generation X -- defined in the study as those between ages 30 to 54 -- are making some progress when it comes to feeling on track to retire comfortably and confident in their investment decisions.

Yet Gen Xers are falling behind in significant ways, including managing cash and paying off debt. The percentage of them who have an emergency fund, are comfortable with debt and pay off their credit cards in full dropped one to two percentage points between 2014 and 2015, according to the study.

Gen X also had the largest decline in home-ownership rates of all three generations, from 68 percent in 2014 to 65 percent in 2015.

In 2004, Gen X was the most-successful generation in terms of home-ownership rates, according to an analysis of federal data by The Wall Street Journal. But the housing bust took an outsize toll on Gen X, which as of last year was the least-successful generation in terms of home-ownership rates.

Many Gen Xers bought their first homes in the years leading up to the housing crisis, and thus had a much smaller cushion in terms of equity than their parents or grandparent did, noted Carter.

"The group that is struggling the most is Gen X, especially when it comes to day-to-day money management," said Carter, adding that many in this group are in their middle years and juggling kids and mortgages.

Some 57 percent of Gen Xers have minor children, and 21 percent earn between $100,000 and $150,000 a year, according to the study. Another 20 percent make between $35,000 and $60,000 a year.

As the youngest generation to participate in the study, millennials had the lowest overall financial-wellness score, but that's partly related to their relative youth and lower median income. Most millennials who participated in the study (29 percent) earn between $35,000 and $60,000 a year.

Not surprisingly, millennials are focused on short-term financial goals, including managing cash and getting out of debt. Retirement planning is the lowest among their self-selected priorities, according to the study.

Having grown up during the Great Recession, many millennials are still clinging to their childhoods in other ways, whether out of choice or necessity. About 32.1 percent of Americans between 18 and 34 years old lived in their parents' homes in 2014, edging out the 31.6 percent who were married or living with a partner in their own households, according to a Pew Research Center study based on an analysis of Census data.

Still, there are some reasons to be optimistic about the fate of millennials. Like other consumers, they now have a plethora of money-management resources at their fingertips, such as online tools to budget and track their spending and low-cost, robo-advisor platforms.

Millennials, noted Carter, still have time on their side when it comes to saving for retirement. They're also demonstrating financial savvy at a fairly young age, according to the study. More than 60 percent of millennials who participated in the Financial Finesse study check their credit report annually, and 36 percent have Roth IRAs.

"Millennials have an opportunity to get ahead of the game," said Carter, "especially if they use the tools and resources available to them to save and to do so early as they begin to have children and buy homes in greater numbers."

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