How they have changed over generations
It should come as no surprise that spending habits ebb and flow with the economic outlook, but spending habits also morph from generation to generation. While some would likely guess the younger generation spends more wantonly than those more established, that isn’t necessarily the case. According to the Department of Labor, the way millennials spend their money and the way Generation Xers spend their money are markedly different, but not in the way you would probably think. When it comes to money management, millennials are more cautious than Generation Xers and even baby boomers.
Spending Habits Across the Generations
Millennials, much like the silent generation, grew up in a time of economic uncertainty. If you look back at the defining years of the millennial generation, you’ll see the housing market burst, the dot-com crash, and the great recession. Due to the economic uncertainty that defined their childhoods and early adulthoods, millennials are spending less money than the generations before them.
According to the Department of Labor, millennials, on average, spend $16,000 a year on housing. In contrast, individuals who fall into the Generation X category pay over $21,000 a year. Millennials spend just over $6,000 a year on eating out and food for their homes. Generation Xers spend roughly $8,000 a year on food costs, and baby boomers spend approximately $7,000 a year.
Millennials are spending about $47,000 a year when clothing, food, entertainment, housing and miscellaneous spending is factored in. In contrast, Generation Xers are spending $67,000, and baby boomers are spending $59,000.
Saving for the Future
While millennials have been tagged as listless and lacking in discipline, millennials have a penchant for saving that the generation before them does not share. Millennials are forgoing traditional milestones in favor of better money management. They are more likely to contribute the maximum to 401ks for match purposes, and they are less likely to own a home or a car. They are also putting off marriage and having children, in favor of sharing a house with roommates. They just don’t find traditional milestones as important as the previous generation and are harnessing technology to help their money management activities.
Baby boomers, for example, have been padding their savings for years. Generation Xers are more likely to save for specific items, like a home or a car. Millennials on the other hand, are quickly catching up to baby boomers in the savings category and are more willing to get creative when it comes to entertainment so that they can save more money.
According to U.S. News, millennials simply don’t have the same priorities as their parents. This is mainly due to what they are experiencing regarding the job market, student loan debt, and the economic downturns they have witnessed in their young lives. An inherent need also influences their money management strategies. Young adults are less likely to see pay raises and are more likely to owe a hefty sum in student loan debt.
The Bottom Line
Money management changes based on priorities, according to reports. While millennials are coming of age and harnessing more purchasing power, they are also more cautious with the money they spend. While the generation has been pegged as less structured, they are also far more creative. That creativity reaches to their money management, and it seems they are moving in a direction that will ensure they save more than generations before them if current trends are predictive.
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