The truth about Millennial spending habits

August 30, 2017 by Andy Penkalski

A young Millennial couple discuss their financial health.

about the author:

Andy Penkalski

Marketing manager

Andy oversees all automated marketing initiatives. He is interested in always discovering new tools for brands and businesses to more effectively reach their audience and improve metrics for success within their own organization.

You are probably plenty familiar with the prism of platitudes that are typically projected onto the Millennial generation – they spend frivolously on hospitality; they are forcing every media outlet to pivot toward video; and they subsist solely on avocado toast.

While the last two items in that list are mostly true, assumptions about the spending habits of the third-greatest generation are rarely more than the same folly-of-youth generalizations that have been levied against any young adult since leisure became afforded to the working class around the turn of the twentieth century. It is true that Millennials spend are spending more. It is just not where older generations tend to assume it is.

Bills, bills, bills

According to a recent Bankrate study, Millennials spend less on vacations and more on bills than previous generations. Millennials on average spend $74 more per month on groceries and $26 more per month on cell phone bills, according to the Bankrate study. Oppositely, the same study purports that Millennials spend $722 less on vacation and travel annually than older generations and $34 less per month on television services.

Similarly, Millennials who are also able to make inroads on property ownership also somewhat expectedly continue to suffer from high interest rates. According to the August 2017 Down Payment Report from Down Payment Resource, the average rate for a Millennial purchase loan in May was 4.3 percent, a 67-basis point increase over May 2016.

A generation in transition

Just as older generations grew into shifting spending habits, life events for Millennials in comparison to that of baby boomers are not terribly different. The channels of spending and earning have just evolved. Older generations may view data plans as nice-to-haves, but for reasons both professional and personal, most Millennials would view connectivity as essential to modern life.

Oddly, the spend difference in television services may be the most telling of the trends mentioned above in regards to generational through lines. It speaks to the fact that older generations are not immune from habitual luxury spends any more than Millennials. Every generation spends more and less in certain areas than their predecessors as our culture and economy at large transforms. Millennials may be buying fewer homes right now, but it is not out of pure disinterest.

The conversations around typical life events that advisors have in the coming years may evolve, but they will continue to happen – often more frequently with a demographic yet to be embraced. Twentysomethings today are not terribly different from the twentysomethings 30 years ago; they do not have much money, and they would love to eventually change that.

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