Thanks to the birth of the internet, the average person has access to unimaginable amounts of research, data, and information. Because of this, society’s desire to understand everything from the statistical probability of getting hit by lightning to the best city to travel to in the fall is high. Among the plethora of topics heavily researched and published on are characteristics of the millennial generation. From where they like to shop for their food to why they aren’t getting married, a researcher has conducted a study and concocted a theory to understand millennial tendencies.
One particularly interesting facet of the millennial generation is their spending habits. Millennials are defined by those who were born between 1980 and 1994, or are 24 to 37 years old. Over half of all millennials are still supported in some form by their parents, which is unique only to this generation of adults. As one could assume based upon the fact that millennials still require financial help from their parents, this generation is falling short when it comes to saving money. That is not to say that millennials do not see the value in saving. What is fascinating about this generation is that studies consistently find that millennials consider saving to be very important. They also are more likely to seek out professional help when it comes to investing and managing their finances than previous generations. However, the importance that millennials place upon saving does not directly correlate their spending decisions.
Investopedia conducted a survey on millennial spending habits, and reported that “one of the most disturbing findings of this study is that seven out of ten young people define financial stability as being able to pay all of their bills each month.” Interestingly, Investopedia does not define why this is disturbing or offer an explanation as to what financial stability should mean. They also report that over half of millennials have to use a credit card to pay for basic necessities such as food and utilities, while a quarter of millennials using credit cards are not paying them off on time. CNBC reported that a majority of millennials have less than $1000 in their savings account, leading to the question, what are millennials spending their money on?
Charles Schwab conducted a study which found that over 60% of millennials spend more than $4.00 on coffee, 69% will splurge on trying a new restaurant, and 79% will buy clothes they do not need. In simple terms, the vast majority are spending money on conveniences and non-utilitarian goods. Millennials are also averse to owning as opposed to renting (we’re talking everything from cars to homes), which is not as financially beneficial in the long term although it does allow for flexibility in the short term.
Ultimately, millennials are planners, but their short-term spending habits can overshadow their desire to save for the long-term. Social media has perpetuated the ‘Keeping up with the Jones’s’ mentality of needing to have the same clothes, cars, and even experiences as those around you. While millennials have a propensity to plan out their finances and value savings, this does not mean that they are actively choosing to save over going to the new hot restaurant or buying designer clothes. Millennials have the knowledge to understand that they should be saving, but the real question for this generation in the years to come is, do they have the restraint to act upon this and actually save?