We hear a lot of griping about millennials, don't we? How they're spoiled and incompetent, how they're obsessed with social media and memes. Older generations like to call them lazy and entitled and superficial. We've even blamed millennials for ruining entire industries like casual dining, starter homes, and retail. We sure place a lot of blame on an entire generation trying to navigate the country left to them by previous generations, don't we? But how much of the blame can be attributed to their lifestyles, and how much of it is beyond their control? Why aren't millennials buying new homes and mattresses or shopping in brick and mortar retail establishments?
Turns out, it probably has less to do with their lifestyle and desires, and more to do with their finances. A new study by the Federal Reserve suggests that millennials' spending habits are what they are not because of choice or a new way of doing things. Their spending habits are different than previous generations because they're literally poorer.
The Federal Reserve study was completed by Christopher Kurz, Geng Li and Daniel J. Vine. The authors contend that millennials are simply less financially well-off compared to previous generations. They have lower assets, less wealth, and earn less money. Additionally, millennials are contending with higher health care costs, higher home prices, and inflated college tuition.
Researchers examined the spending habits, income, net worth, debt, and demographic factors among millennials (born between 1981 and 1997), Generation X, baby boomers, and the greatest generation. They found that is was primarily differences in average age and income that explain an important portion of the consumption gap between the millennial generation and those who came before them.
Some of millennials' spending habits are similar to their parents' and grandparents' generations. For example, motor vehicle sales account for about 20% of retail sales, and are sensitive to how the economy is doing. But the study found that millennials have similar tastes and preferences as the generations before them. The study found the same for food and housing. It's not that millennials aren't spending money on these things - it's just that they have less money to spend. It will be interesting to see how these trends play out for the millennial generation, and the generations that come next.