What separates Generation Y from X? And hey Gen Z, welcome to the party! What’s the cutoff? How old is each generation? Are they really that different?

It’s easy to see why there is so much confusion about generational cohorts.

If you’ve ever felt muddled by this “alphabet soup” of names — you’re not alone. The real frustration hits when you realize that Millennial consumers represent the highest-spending generation in 2020 — with a projected $1.4 trillion tab.

And though their current wealth has been dragged down by not one but two “once-in-a-lifetime” economic crises during their most impactful career years, Millennials stand to inherit over $68 trillion from Baby Boomer parents by the year 2030, setting them up to potentially be the most wealthy generation in U.S. history.

Generation Z isn’t far behind, projected to hit $33 trillion in income by 2030 — that’s more than a quarter of all global income — and pass Millennials in spending power the year after. No matter how you slice the data, the younger generations have never been more critical to your financial institution’s future.

Unless you understand who they are and what they want, you won’t capture a dollar of their money.

People grow older. Birthdays stay the same.

A common source of confusion when labeling generations is their age. Generational cohorts are defined (loosely) by birth year, not current age. The reason is simple — generations get older in groups. If you think of Millennials as college kids (18 – 22), then not only are you out of date — you’re thinking of a stage in life, not a generation. Millennials are now well out of college, and that life stage is dominated by Gen Z.

Another example, a member of Generation X who turned 18 in 1998 would now be over 40. In that time, he or she cares about vastly different issues and is receptive to a new set of marketing messages. Regardless of your age, you will always belong to the generation you were born into.

The breakdown by age looks like this:

  • Baby Boomers: Baby boomers were born between 1946 and 1964. They’re currently between 57-75 years old (71.6 million in the U.S.)
  • Gen X: Gen X was born between 1965 and 1979/80 and is currently between 41-56 years old (65.2 million people in the U.S.)
  • Gen Y: Gen Y, or Millennials, were born between 1981 and 1994/6. They are currently between 25 and 40 years old (72.1 million in the U.S.)
  •                     Gen Y.1 = 25-29 years old (around 31 million people in the U.S.)
  •                     Gen Y.2 = 29-39 (around 42 million people in the U.S.)
  • Gen Z: Gen Z is the newest generation, born between 1997 and 2012/15. They are currently between 6 and 24 years old (nearly 68 million in the U.S.)

The term “Millennial” has become the popular way to reference both segments of Gen Y (more on Y.1 and Y.2 below). And as for “Zillennials,” those wedged at the tail end of Millennials and the start of Gen Z are sometimes labeled with this moniker — a group made up of people born between 1994 and the year 2000. Realistically, the name Generation Z is a placeholder for the youngest people on the planet. It’s likely to morph as they leave adolescence and mature into their adult identities.

Why are generations named after letters?

It started with Generation X, people born between 1965-1980. The preceding generation was the Baby Boomers, born 1946-1964. Post World War II, Americans enjoyed new-found prosperity, which resulted in a “baby boom.” The children born as a result were dubbed the Baby Boomers.

But the generation that followed the Boomers didn’t have a blatant cultural identifier. In fact, that’s the anecdotal origin of the term Gen X — illustrating the undetermined characteristics they would come to be known by. Depending on whom you ask, it was either sociologists, a novelist, or Billy Idol who cemented this phrase in our vocabulary.

From there on it was all down-alphabet. The generation following Gen X naturally became Gen Y, born 1981-1996 (give or take a few years on either end). The term “Millennial” is widely credited to Neil Howe, along with William Strauss. The pair coined the term in 1989 when the impending turn of the millennium began to feature heavily in the cultural consciousness.

Generation Z refers to babies born from the late 90s through today. A flurry of potential labels has also appeared, including Gen Tech, post-Millennials, iGeneration, Gen Y-Fi, and Zoomers.

Why are generation cohort names important?

Each generation label serves as a short-hand to reference nearly 20 years of attitude, motivations, and historical events. Few individuals self-identify as Gen X, Millennial, or any other name.

They’re useful terms for marketers and tend to trickle down into common usage. Again, it’s important to emphasize that referring to a cohort only by the age range gets complicated quickly. Ten years from now, the priorities of Millennials will have changed — and marketing tactics must adjust instep. There are also other categories of cohorts you can use to better understand consumers going beyond age or generation..

Remember, these arbitrary generational cutoff points are just that. They aren’t an exact science, and are continually evolving.

Whatever terminology or grouping you use, the goal is to reach people with marketing messages relevant to their phase of life. In short, no matter how many letters get added to the alphabet soup, the most important thing you can do is seek to understand the soup du jour for the type of consumer you want to attract.