Millennials make up a quarter of the population in the U.S., making them the largest living generation with the greatest purchasing power. Millennials, defined by the U.S. Census Bureau as ages 24-38, have financial goals, habits and preferences that distinguish them from other generations. Understanding how they are managing and spending their money can help digital marketers to capture and retain this influential consumer market.
Millennials And Money
Millennials are adults now, and with adulthood comes new priorities. According to the 2020 Bank of America “Millennial Report,” most Millennials are practicing positive financial behaviors such as budgeting, saving, paying down debt and investing.
For Millennials who are saving, it’s not just pennies in a rainy day jar. Almost a quarter of Millennials who are saving have $100,000 or more put away and three-quarters are saving for retirement, more than half are building emergency funds and one-third are saving to buy homes.
Although Millennials are coming of age and becoming more responsible with their money, many are burdened with debt. More than three-quarters of Millennials have revolving or unsecured debt of some kind, including student loans, credit card debt, auto loans, mortgages, personal loans or medical debt. As a result, the majority (75%) of Millennials feel insecure about their current and future financial stability. This insecurity is especially prevalent for Millennial parents, because the majority of Millennial parents underestimated the expense of raising families and now feel stress over the amount they have left to save for emergencies, retirement and their children’s education.
Millennial Money Values
The Bank of America “Millennial Report” surveyed Millennials through a series of “would you rather” questions.
Based on the survey responses a majority of Millenials would:
- Fund down payment on homes rather than have big weddings
- Buy smaller, more affordable homes with smaller mortgages rather than larger, more expensive homes with more debt
- Opt for minimalist lifestyles in order to save for the future rather than living extravagantly now
- Cut back on dining out, cable and streaming services, gym memberships and vacations to reduce debt
Millennials, Technology And Purchasing Decisions
Millennials spend two hours 39 minutes a day on social media, and many report their purchasing behavior is influenced by it. 5W Public Relations 2020 Consumer Culture Report states Millennials are more likely than other generations to claim online ads, Instagram or YouTube influencers, celebrities, articles, blogs or podcast sponsors have some influence over their purchasing decisions.
Millennials’ confidence in the economy is increasing, they are spending, and much of it is online. According to UPS, Millennials are making more than half of their purchases online. They are using subscription services to replace regular shopping trips to grocery stores and other brick- and-mortar stores. Many Millennials will visit a site many times before purchasing an item and they reported that they will wait for a sale or discount. Although they are more often shopping online, a majority of Millennials reported that they would rather find a product in a store so they could physically interact with the product before purchasing. This shows that traditional marketing is still an important tool.
Even though Millennials are growing up, 5W’s Consumer Culture Report claims that they can still be impulsive shoppers. They spend the most time online and therefore encounter the most advertising. 82% stated that they will purchase an item the first time they see it if they like it enough. However, with impulsive shopping comes a greater number of returns.
Millennial Spending Vs. Baby Boomer And GenX Spending
Millennials Buy Based On Values
As Millennial values and habits shift toward adulthood, their spending habits are also transitioning. Neilson’s “Millennials on Millennials” shopping insights report shows that, as Millennials are spending more on groceries, childcare products and gas, they are also spending more than other generations on easy and convenient food products for families and more on products with health and wellness claims such as organic, natural, GMO free, probiotic and nut free.
Millennials Rent More Than Prior Generations
Although Millennial home ownership is growing, Millennials lag behind older generations with regard to owning homes. Millennials own 4% of the real estate value in the U.S., while Baby Boomers owned 32% of U.S. real estate value at their age, Christopher Ingraham reported for The Washington Post. Many Millennials say they prefer to rent rather than own, states Business Insider. In fact, 12% of Millennials say they plan to rent forever, with 69% citing too much debt as the reason. However, it is not just housing Millennials are renting. They are also renting clothing, furniture, vacation retreats and transportation. Based on U.S. Census data, Millennials will pay $92,600 in total rent by the time they turn 30, more than Baby Boomers or GenXers paid by the time they hit the same age.
Millennial Entertainment Spending Is Focused On Mobile And Streaming
Millennials spend more money for mobile phones and less on entertainment than older generations. 93% of Millennials own smartphones, compared with 90% of Gen Xers and 68% of Baby Boomers, according to a Pew Research Center survey of U.S. adults conducted in early 2019. Meanwhile, a 2018 consumer expenditure survey by the U.S. Bureau of Labor showed that Millennials spent considerably less on entertainment than older Americans, $2,391 annually, while Baby Boomers spent $3,801 per year, and Gen Xers spent $3,921 per year. However, Millennials spent more than other generations on streaming services for TV, movies and music.
Millennials Are Comfortable With Accruing Debt For Travel
Although Millennials may be more budget conscious than their older counterparts, they are splurging in certain areas. According to CNBC’s Make It, Millennials are prioritizing travel. A Credit Karma 2019 poll found that more than half of Millennials and younger respondents have gone into debt for summer travel with little feelings of regret.
Millennials Spend On Dining Out And Coffee
Millennials also spend more on dining out than older generations. For example, Charles Schwab's Modern Wealth Index for 2017 found 60% of Millennials will buy a cup of coffee that costs more than $4, compared to only 40% of Generation Xers or 29% or Baby Boomers.
Millennials Won’t Skimp On Pet Needs
Forbes reported that 35% of pet owners are Millennials, and pets are something Millennials care deeply about. Millennials will splurge on their “fur babies,” with 60% saying they are likely to buy sweaters, coats, dresses and other fashion for their pets. They are also buying pet insurance, treats and food, bedding and grooming supplies.
Generational Experiences Shaped Millennial Spending Habits
A generation is often defined by the outside societal factors that influence them. The Millennial generation’s managing and spending of money reflects the increased cost of college, lower salaries, the gig economy and the explosive growth of ecommerce. Internal factors such as the shifting priorities that come with adulthood are also influencing Millennials’ financial decisions. More Millennials are saving, and a majority of their spending is on essentials such as groceries, gas and childcare products. Millennials have long been the generation known to value experiences over products, and their splurges reflect this, spending more on travel and trendy dining experiences than earlier generations, and paying for services and products that add convenience to their busy lives.
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