Money Habits of the Millennials

Surveys reveal attitudes about spending, saving, and investing

Baby boomers who lost part of their nest eggs in the recession face a difficult retirement, but those born between 1981 and 1996, who have come to be known as the millennial generation, or Generation Y, face a most uncertain economic future due to various events.

For example, this group has seen their parents and later themselves struggle with three decades of stagnant wages, followed by the Great Recession, an ongoing pandemic, and a volatile stock market. As the wealth gap widens in America, millennials appear to be facing a challenging economy as they move into adulthood (younger millennials) and middle age (those born in '80s).

Given all of these factors, how do millennials, as a group, handle their money and what are their financial habits? Here are a few ways Gen X's younger siblings handle investing, employment, and spending in their lives.

Key Takeaways

  • The millennial generation's attitudes toward money and investing differ from previous generations, particularly when compared to the baby boomers.
  • High student loan debt continues to impact the economic future of millennials.
  • The COVID-19 pandemic impacted many key areas of life from employment to investments.
  • Many millennials chose to work remotely during the pandemic, which shifted how they spent their money.
  • Millennials are more likely to emphasize an investment philosophy that enriches both themselves and the world around them.

Millennial Statistics

Although they have frequently been labeled as materialistic, spoiled, and saddled with a sense of entitlement, the truth is some millennials feel they will not be able to achieve material goals like finding their dream job, buying a house, or retiring until much later in their lives than their parents did. Paying off student loan debt has become increasingly difficult for those struggling with unemployment and low-paying jobs.

The Great Recession may have left more than 15% of millennials in their early 20s out of work, many of whom are still struggling to get their feet on the ground. This could hurt them long after they do get work. Economic studies of unemployed people during the recession in the early 1980s revealed that they were still behind schedule financially 20 years later.

And if the recession didn't impact them, the coronavirus pandemic did. According to a 201 study, 33% of millennials said the pandemic made them less confident retiring at their desired age.

Millennial Investment Philosophy

Millennials have adopted an increasingly global mindset, with factors such as social responsibility and the environment frequently playing a pivotal role in placing their money. Many millennials are instead choosing to follow either their instincts or go along with their peers regarding investment choices. The pandemic may have changed this attitude for some millennials.

This distrust of financial advisors, however, doesn't seem to apply to affluent millennials. Investopedia's Affluent Millennial Investing Survey revealed that nearly two-thirds (65%) of the affluent millennials surveyed said they trust financial advisors. The survey gathered responses from 1,405 millennials who reported a median income of $132,000. Additionally, affluent millennials who consider themselves knowledgeable about investing are more than twice as likely to have a financial advisor.

Still, the growing movement in the financial industry toward compensation models that are based on investment performance rather than commissions has yet to make an impression on some people. Some millennials are more interested in having a personal connection with those who manage their money than ever before, despite their comfort with the use of mobile and online technology to perform many investing functions.

Millennial Spending Habits

Millennials are often characterized as conscious consumers. Sustainability and customer service are high on the list of what they buy and how they shop. Millennials spent over $4,000 on travel in 2021, and high-net-worth millennials spent upwards of $5,000 or more. In fact, according to Expedia, millennials travel 35 days per year.

When they aren't traveling, they are enjoying their food and beverages. On average, millennials spend more dining and shopping online than previous generations. Millennials and post-Millennials spent 47% of their total food spending on dining out or take-out food, according to 2018 figures from the U.S. Bureau of Labor Statistics (BLS).

Note; The BLS report came out in 2020, and as the pandemic kept many folks at home, that figure may go down. Overall, Millennials appear to value experiences, like travel, dining, and shopping online, and, no surprise, social media may impact millennials spending habits as well.

Interestingly, millennials in 2019 and 2020 (the most recent data as of March 1, 2022) made up the largest segment of new home buyers, accounting for 37% of the overall housing market in the United States. Generation Y made up a significant share of first-time buyers as well. According to data from the National Association of Realtors, younger millennials (age 22-30) made up 82%, and 48% of older millennials (age 31-40) bought their first home during July 2019 and the following year.

The Impact of Social Media

Of course, much of the pressure that millennials feel to conform to the financial habits of their peers come from social media, where financial milestones or adventures can be posted for all to see and envy.

Because of the influence of social media, plastic surgery is another area where some millennials are spending their money. Injectables are becoming more popular, and social media influencers frequently post before and after videos online. According to a 2020 survey by the American Academy of Facial Plastic and Reconstructive Surgery, 74% of plastic surgeons reported seeing an increase in patients under the age of 30 wanting injectables or cosmetic surgery.

Workplace Philosophy

Although pay and compensation are still significant for most millennials seeking a job, it is not always the primary factor determining the best place to work. Other issues have become increasingly relevant, such as autonomy, respect, and being treated fairly. They expect employers to be able to provide these conditions in their workplace.

Their access to digital information has also made them much more aware of what their peers and superiors are earning, what they are worth, and their rights and privileges in the workplace. They mirror their investment philosophy in that they want work that enriches not only themselves but the world around them. When the coronavirus broke out in early 2020, many millennials found themselves out of the office due to social distancing guidelines. This allowed many millennials to work remotely and combine it with travel.

How Much Money Do Millennials Make?

According to the U.S. Bureau of Labor Statistics, in 2020, the median income for millennial households (ages 35-44) was $85,694.

How Do Millennials Manage Their Money?

Millennials are likely to use digital banking and e-trade (robo investors and micro-investing) systems for investing. In fact, one in four millennials holds their cash in digital-only checking accounts. As a group, they tend to be socially conscious and may invest in eco-friendly companies. Millennials have proven to be comfortable with cryptocurrency and point-of-sale lending alternatives.

What Do Millennials Spend Their Money On?

Millennials spend their money on food and drink away from home, travel experiences, student loan payments, and as of 2019, Generation Y has been buying their first homes.

The Bottom Line

Millennials face a set of challenges, primarily heavy debt, that will only be truly understood in hindsight. The future for this generation may even be more uncertain in some respects than for any previous generations. Their ability to succeed financially will depend upon many factors, including economic and political conditions. On the upside, more millennials are buying into the housing market, finding opportunities for careers outside the cubicle, and funneling more of their money into retirement.

Article Sources

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