The wealth gap divide: Key trends and lessons

A survey of Australian, Canadian and American adults

In this article:

Australian working class more upwardly mobile than Americans and Canadians

Comparing the social class respondents said they grew up in to where they are today, the middle class saw a big increase and the working class saw a decrease across all three countries as respondents moved up the social ladder.

Australia’s biggest increase was people moving from working to middle class. Of those who said they grew up working class, 38.9% had moved up and were now middle class. In Canada it was lower at 32.8%, and the USA had the lowest amount of upward mobility for the working class at 28.3%.

Interestingly, the data shows that those born with a silver spoon can have it taken away, as a considerable number of people who grew up in the upper class now identified as middle class.

In Canada, almost half of those born upper class now were middle class (43.4%), while in America this was the case for 37.5% of those born upper class. Australia saw the least amount of upper class people stepping down a rung on the social ladder, but it was still a considerable amount at 33.3%.

The graphs below showcase the change in social class from childhood to the present day, as at the time of the study.

Younger generations more likely to be born upper class than older generations

It’s now a classic argument between different age groups – who had it better? While this can be quite an involved discussion that can potentially sour the mood at any family gathering, when it comes to social class, one thing is clear: Younger people are off to a better start.

Across each country we surveyed, younger age groups were more likely to say they were raised in the upper class of society than older generations – except for American Gen Z (18–25 year-olds). Interestingly, only 1.6% of Americans in this age group said they grew up upper class, compared to 9.2% of Australians and 10.8% of Canadians in the same age group.

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Less than half the population receive useful education from parents about money

Compare the Market Australia’s survey asked respondents if their parents ever educated them about finances during their childhood. The number of respondents who said their parents gave helpful lessons were:

However, some said that while their parents taught them about money, it wasn’t helpful:

Additionally, a further third of respondents surveyed in each country said they were never taught about finances by their parents and had to learn in other ways, while less than 10% in each country said their parents didn’t teach them and they still struggle to understand finances today.

Upper class respondents more likely to have received beneficial financial know-how

Breaking down the responses to this question by the self-identified social class of respondents, those who said they are currently upper class were more likely to have been taught by their parents.

On the other hand, those who identified as working class were more likely to not have been taught by their parents and had to figure things out for themselves. The graphs below highlight the difference for each country.

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Are people confident enough to teach future generations about money?

When asked whether they would feel confident enough to teach younger generations about money and finance, just over 50% in each country said they felt they could teach about some important monetary issues – but not all.

There was barely any difference between each country (55.7% in Australia, 55.1% in the USA, and 54.8% in Canada). Interestingly, Americans were the least confident, with 16.3% saying they were not confident teaching about critical finance topics at all. Canada was a close second with 14.9% saying they didn’t feel confident teaching about it, followed by 12.0% of Australians.

Interestingly, Australians and Americans who said they were currently in society’s upper class were most likely to say they could provide adequate knowledge on all important monetary issues (73.8% of Australians and 56.1% of Americans in this group), but this wasn’t the case for Canada.

The majority of Canadians who were currently upper class indicated they felt comfortable teaching about some important issues, but not all (68.1%). Only 29.8% of upper class Canadians felt prepared to teach about all important finance issues.

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How do people handle their money?

The survey also asked respondents to describe their money spending habits. For Canada and the USA, the number one response was, “I budget to save and spend on what I want” (38.9% for Canada and 38.0% for the USA).

In Australia, the top response was, “I’m a serious saver – I never spend money on things I don’t need” (39.4%).

Worryingly, more than one-in-ten people in each country say that they spend beyond their means and never have any savings (11.0% in Australia, 13.2% in Canada and 13.6% in the USA). The table below shows the results for each country to this question.

Money habits across the social classes

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How many people received pocket money growing up?

Pocket money can be a great way to teach a child about money and managing finances. Regardless of whether it was freely given or earned for doing household chores, over half of Australians got pocket money from their parents when they were kid (52.1%). An additional 24.0% said they sometimes got pocket money, while 23.8% said they never received pocket money.

Compared to the USA and Canada, Australians were slightly more likely to receive pocket money when growing up. In the USA 44.7% said they regularly received it, and 32.5% said they got pocket money sometimes, while 22.8% said they never did. In Canada the results were 48.2% for regularly, 27.8% for sometimes and 24.1% for never.

This means that Canadians overall were the most likely to never receive pocket money in comparison to Americans and Australians.

But what impact (if any), did this have on their spending habits?

The majority of respondents said they would save up any pocket money to spend on something special.

Does receiving pocket money as a child influence adult spending habits?

By diving into the answers, it appears that the way people handle their pocket money as a child has an impact on how they handle and spend money as an adult.

Of course, other factors will also influence someone’s money habits, including receiving instruction from parents and being exposed to financial matters when growing up, as shown earlier. But as the charts below show, there is a clear connection between what people did with their pocket money as a kid and how they spend money today.

For example, 34.7% of Americans who spent their pocket money immediately identify as impulse buyers today, while the majority of those who saved their pocket money say they budget and save up to buy the things they want nowadays (44.5%).

In Australia and Canada, the majority of those who spent their pocket money immediately and those saved it up were budgeters today. In Australia, 32.8% of childhood spenders and 39.1% of childhood savers said they budgeted to spend on what they wanted, while in Canada it was 31.9% and 41.3% respectively.

However, the second most common response was quite telling. In Australia, 25.8% of childhood spenders identify as impulse buyers today, while the second largest response for childhood savers was to identify as a serious saver in their adult life (those who never spend their money on things they don’t need) at 44.0%.

It was the same story in Canada with 25.2% of childhood spenders describing themselves as impulse buyers, while 40.5% of those who saved their pocket money as a kid say they are a serious saver today.

The charts below show the breakdown of current money habits for those who were pocket money savers and spenders in each country (those who weren’t allowed to spend their pocket money weren’t included due to a low response rate).

Home ownership more a dream than a reality for young adults

Owning a home is a massive financial undertaking and is typically the most valuable asset most people would be able to own in their lifetime. Not everyone necessarily wants to own a home, but it’s understood that most people do.

And unfortunately, it’s getting harder and harder to afford a home – especially for younger adults.

Housing affordability is one of the key issues in arguments between the generations. For Baby Boomers, houses were simply more affordable during their younger years. In the US, the Berkeley Economic Review found 45% of those born between 1946 and 1964 were able to buy a home when they were 25 to 34 years old. In 2019, this had dropped to 37% for Millennials of the same age (those born between 1981 and 1997).¹

Locally, the Australian Institute of Health and Welfare (AIHW) highlights that 54.2% of those born between 1947 to 1951 were able to become homeowners between 25 and 29 years old, but that has dropped to 36.1% for those born between 1992 and 1996.²

This data backs up the results from our survey. While overall, most people own a home (either outright or with a mortgage), when broken down by age group, the difference in home ownership rates is astronomical.

The chart above shows the USA had the biggest difference in home ownership rates for Gen Z adults. Only about 20% owned a home, while 80% didn’t – but this quickly flipped with 69.3% of Millennials owning homes, as opposed to 30.7% who didn’t.

Australia and Canada had a closer gap with just under 60% of Gen Z survey respondents being non-homeowners while just over 40% were homeowners, and this changed at a slower rate for older generations than it did in the US.

For Baby Boomers (those aged 58 and above), Australia had the biggest gap between homeowners and non-homeowners in this age group with 83.3% of Australian Boomers owning a home compared to 16.5% who don’t.

Of course, on one hand, this is to be expected. The older you are, the more time you’ve had to save up money for a house. The problem is that house prices have outstripped wage growth,³ so those dreaming of owning a home are chasing a goal that’s getting further away from them every year.

The class divide on home ownership

When breaking down home ownership by social class, the working class were more likely to say they didn’t own a home, while the other classes were more likely to own with a mortgage or outright.

In Australia, 44.2% of the working class don’t own a home, compared to 47.7% of the upper class and 40.6% of the middle class who own with a mortgage.

Canada had the biggest divide between the social classes, with 63.1% of the working class not owning a home, while 42.5% of the upper class and 37.5% of the middle class own with a mortgage.

In America, the upper and middle classes were most likely to say they owned their home outright (46.3% and 39.9% respectively), while 57.0% of the working class said they don’t own a home.

The charts below show the spread of results.

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As our survey demonstrates, there are numerous factors behind people’s understanding of finances and money habits, but there is a clear wealth gap between the working class and middle/upper class – especially when it comes to home ownership.

It’s important to note – those who grew up in an upper class family weren’t invulnerable to sliding down the social ladder, and those who were raised in the working class were able to climb their way up. However, the survey shows there is a clear wealth gap in society, and this is most noticeable when it comes to home ownership as well as being taught about finances by parents, and how prepared people would be to teach future generations about money.