How much does a cash rate rise or cut affect your generation?

When cash rates were rising, the media painted Baby Boomers as the winners. With their life savings stashed away in high-interest savings accounts, countless media articles lamented how easy they had it. The same commentators worried that younger generations, particularly Millennials, would feel the most pain.

This is a fair assumption. Only 36% of Millennials have a savings balance of $10,000 or more, yet 31% have a home loan worth $100,000 or more. This is in stark contrast to Baby Boomers, of which 47% have $10,000 or more in savings and only 5% have a home loan debt greater than $100,000.

Boomers balance sheets are in much better shape. But just how much of a difference does this make when rates start rising or falling? And now that the cuts are coming, are fortunes finally reversing?

How a rise and a cut affects the generations

We modelled the effects of a 1% cut and a 1% rise in the cash rate. Using the average savings balances for each generation, we calculated the impact on savings returns. We then combined the average remaining loan amounts and loan terms to estimate how a rate change would affect home loan repayments. We sourced all of this data from Finder's Consumer Sentiment Tracker.

The articles got it right. Baby boomers are the only generation who benefit from a cash rate rise, to the tune of $521 annually. Because they have the largest savings balances, the interest they earn increases the most. A 1% rise earns them an extra $597 each year. This is compared to only $280 extra for the average Gen Z Australian.

Conversely, the largest winner from a cut are Millennials. They bank an extra $507 over a year, only slightly less than baby boomers after a raise. The fortunes of baby boomers are almost entirely reversed. They lose the most interest income and very few are still repaying a home loan

Final thoughts

These graphs don't challenge what we already know but they do illustrate the life stages of the different generations and how this affects their sensitivity towards rises and cuts.

It's important to remember that these graphs are also based on averages. This is the easiest way to get a broad idea of how much the cash rate affects each generation but it will miss the nuanced experiences of a lot of Australians.

With that said, the graphs above show us that most Gen Z Australians are largely unaffected by cash rate moves. They are too young to have developed serious savings or bought a house. Gen X are similar. This group has paid down most of their home loan but are still burdened by children and haven't yet built up enough savings.

Baby Boomers, unburdened by the costs of children, have built a healthy savings balance. And Millennials, who are starting a family and entering the property market, have the highest levels of debt.

Regardless of your life stage, there are still ways to lessen the impacts of cash rate moves on your finances. Be proactive and ensure you are paying the lowest home loan rate. If you are lucky enough to have some money saved, ensure you are being paid the highest interest rate.

Finally, if you are struggling with your home loan repayments there are options. Talk to your lender, they have a number of ways in which they can reduce the burden like mortgage holidays, interest-only loans and more. Above all else, assess what is right for your situation and life stage.

Finder's Insights Column examines issues affecting the Australian consumer. It appears weekly on finder.com.au.