Gen X Faces Crushing Costs of College, Parents, and Mortgages—Here’s How They’re Cutting Back

Spending among Generation X is getting weaker, largely due to slower wage growth and a greater need to focus on other priorities, such as educational costs, aging parents, and housing. Commonly defined as those born between 1965 and 1980, Gen X’s older members are approaching retirement age.

Consumer spending makes up nearly two-thirds of economic activity in the U.S. while contributing significantly to labor market growth. In contrast to Gen X, Generation Z, made up of people born between 1997 and 2012 and often the children of Gen X, is the fastest-growing generation and poised to be the largest spenders, according to NielsenIQ.

Why Is Gen X Cutting Back?

Gen X has largely been considered the “forgotten middle child” of all of the generations. But the people in this generation have been influential. Collectively, they spent the most through 2022, with their buying power projected to grow from $15.2 trillion in 2025 to $23 trillion by 2035.

Many individuals, though, appear to be cutting back on discretionary spending. According to a Mather Institute survey, 69% of Gen Xers surveyed said their stress levels ranged from “moderate” to “extreme,” with money and finances being a central focus for 43% of respondents.

The economy is also a challenge. A cooler labor market and slow wage growth are forcing Gen Xers to tighten their purse strings. This includes cutting back on certain discretionary expenses, which may include things like dining out, traveling, and luxury goods. But that doesn’t mean they’ve stopped spending. They’re just prioritizing other areas to spend their money on.

Spending Priorities for the Sandwich Generation

The needs and obligations of Gen Xers are becoming priorities over their wants. According to U.S. Bureau of Labor Statistics data, this group spent an average of $95,692 in 2023 on annual household expenditures, which isn’t surprising when you consider many Gen Xers are in their prime working years. This age group is sandwiched between their children and their aging parents, which is why it’s sometimes called the “sandwich generation.”

Kids and Aging Parents

Raising kids can be challenging. This generation is spending a lot on their children.

• Child care: Data from the U.S. Census Bureau shows that the number of child care centers across the U.S. has declined while care costs are increasing. Home-based care for school-aged children averaged $5,357 in 2022 compared to $17,171 for care at infant-based facilities. This represents 8% to 19.3% of the average annual household median income.
• Education: Many Gen X parents are spending a significant amount of money to put their kids through school. Back-to-school budgets are increasing, and they may be taking on additional debt to finance their children’s college educations. This is in addition to paying off their own student loans.
• Extracurricular activities: They’re also willing to spend more on their kids’ extracurricular activities. Parents see these activities as an investment in their kids’ development and future, with the average family spending $731 annually per child.

Helping pay for the costs of aging parents is also straining Gen X budgets. According to AARP, 29% of caregivers are from this generation. Roughly 16% of people said they had to quit their jobs to care for their parents. Costs for adult caregiving vary, from about $6,000 per month for in-home caregiving and $9,000 to $10,000 per month for care in an assisted-living facility.

Housing Costs

Housing is another major cost for Gen Xers. This generation represents about 1 in 4 new homebuyers in the U.S. Balancing mortgage payments and existing debt can be a major challenge.

The average mortgage balance for this generation is $278,935, with an average monthly mortgage payment of $2,313—the highest of any age group. This doesn’t include utility payments or the cost of maintenance.

The Financial Impact of Gen X Spending

Meeting their obligations is putting members of Gen X at risk of being unprepared for their own future. Many believe they’ll need more money to live comfortably during retirement—at least $1.57 million.

Research from Schroders shows that only a small fraction (14%) has enough saved for retirement, while 54% believe they will outlive their assets after they leave the workforce.

Schroders’ survey also shows that:

• Fear of losing capital due to losses is leading many to hold onto a large amount of cash in their portfolios rather than investing it in the stock market.
• The majority of Gen Xers are planning on taking Social Security early because they believe the program won’t have enough to sustain retirement benefits.

It also has the potential for increasing the amount of debt these individuals are carrying just to help their kids go to college, to keep their aging parents healthy, and to maintain a roof over their heads. Data from Experian shows that Gen Xers are carrying a significantly higher amount of debt compared to other generations.

The Bottom Line

Raising a family, caring for aging parents, and the costs of homeownership are why members of Gen X are rethinking the way they spend their money. These major expenses are having a big impact on how long people will work before they retire. If you’re part of this generation, you can make a difference by implementing smart financial decisions, such as budgeting, saving, maximizing retirement contributions, and getting long-term care insurance for your aging parents.