Millennials eating avocado toast while barely having enough money to live on has got to be one of the biggest cliches about this generation.
But, is it true? And, if it’s true, why would Millennials spend money in such a trivial way?
It turns out that Millennials and older generations, like the Baby Boomers, have had different life experiences and financial realities, all of which might make them value money differently. It certainly means that they spend money differently.
So, what are some of the main differences between how Millennials and the boomers value money?
Millennials like to spend on non-essential budget items such as eating out, vacations, and entertainment. While Millennials spend a whopping $478 a month on these nonessential items, Boomers spend over $100 less than that, reporting $359 per month spent on nonessentials. The trouble with that is that 62% of Millennials also say they’re living paycheck to paycheck, while only 53% of Boomers are.
Experts argue that Millennials may be spending more because of the debt burden, including a large quantity in student loans and credit card debt, that they carry in greater amounts than previous generations. It seems counterintuitive to spend more if you have more debt, but money is complicated and emotions surrounding money can make people act irrationally.
Millennials tend to favor spending money on experiences over material goods when compared to Boomers. One study showed that 76% of Millennials said they’d rather spend on experiences over material goods compared to 59% of Boomers who said the same. This may be one positive trend in Millennial habits since experiences bring greater happiness than material things.
This tendency may also relate to a recent trend among the wealthy who, rather than buying status items, show their wealth more discreetly. Instead of buying luxury brand items such as Rolex watches like past generations have done, the newer generation of wealthy spends their money on memberships to luxury gyms, organic food, and expensive vacations. This also extends to spending on clothing, an area in which Millennials prefer casual looks over formal attire. Then, tech-savvy Millennials post about all of these experiences and their wellness journeys on social media.
Millennials and Boomers view wealth differently as far as its purpose. While Boomers tend to view money as a tool to achieve a sense of security, Millennials define wealth as a means to access power and influence.
Furthermore, Millennials prioritize spending their money to create change in the world and make contributions toward a better society. On the other hand, Boomers prefer to live a comfortable life without worrying about money and to leave an inheritance behind for their heirs.
As you can see, there are plenty of differences between Millennials and Boomers when it comes to how they view money, its purpose, and priorities for spending. These differences can provide opportunities for learning and growth for both generations, as long as we’re open to discussing them.
Elaine King, CFP® is an expert on family enterprise consulting, creating strategies for wealth planning, family governance, and personal financial planning. Follow her on Facebook, Youtube, Instagram and Twitter for regular finance tips, strategies, and best practices.