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Home » Frugality

Is Gen Y Becoming the Frugal Generation?

Last updated by on 13 Comments

Gen Y, aka the “Millennials” (ages 18-34), are proving to be a little more cautious about their spending behaviors than their predecessors, the Gen X’ers and Boomers.

A recent report on Gen Y spending behaviors (meant to be a retailer insight study which I have morphed into a more pertinent personal finance topic) showed some interesting findings:

  • 80% of 2,000 respondents believe it is important to get the lowest price on most things they purchase (up from 69% in 2010).
  • 60% are likely to choose a lower priced brand over their usual, if they can save money (up from 51% in 2010).
  • 57% make a point to search online for discounts before shopping.
  • 63% are now sticking to only those brands and stores they know they can afford.

WTF?!

Maybe Gen Y is earning a new moniker, “The Frugal Generation”.

Why is this happening? Here are my suspicions:

1. Financial Hardship

The study found that 25% of Gen Y respondents said they are not able to make ends meet, compared to 17% of Generation X’ers (ages 35-54), and 13% of Boomers (ages 55 and over).

If you can’t get raises, are underemployed, or can’t get a job in the first place, it is going to impact your purchasing behaviors, for starters.

But it probably goes deeper than that. Have you ever heard Boomers refer to folks who lived through the Great Depression as extremely frugal (miserly) because of the fact that they lived through the Great Depression?

Gen Y has lived through The Great Recession, the biggest economic decline since The Great Depression. Could it be that financial hardship has changed our purchasing habits forever, even in good economic times?

Financial hardship has already turned Gen Y into the Boomerang Generation. But who wants to live with their parents forever?

Gen Y spending behavior

2. Personal Debts are at All-Time Highs

With education inflation, student loan debt is at an all time high – exceeding $1 trillion, and only increasing.

Gen Y has a much bigger hole to dig out of if we are blessed with the privilege of a secondary eduction.

Add in credit card debt and fresh mortgages and the result is a frothy debt cocktail that has forced us to be frugal in order to dodge the risk of losing everything.

3. No Inheritances to Bail us Out

Gen Y is starting to realize that there will be no inheritance gifted upon them from their Boomer parents.

The total average retirement savings per American approaching retirement is pitiful:

  • Only 15% of respondents aged 44-54 have over $250,000 saved
  • Only 19% aged 55+ have over $250,000 saved.
  • 62% of those aged 44-54 have under $100,000 saved.
  • 60% over the age of 55 have under $100,000 saved.
  • 44% of those aged 44-54 have less than $10,000 in total savings.
  • 29% of those aged 55+ have less than $10,000 in total savings.

Bailouts aren’t coming to all but a lucky few.

4. Stuff Can’t Buy Happiness?

Is it possible that we’ve seen previous generations fail miserably at trying to buy happiness through stuff and have actually learned from it? Are we becoming a generation of minimalist-consumers?

I know it’s a stretch. I’m crossing my fingers…

What About You?

Why do you think Gen Y is becoming more frugal?


About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 7,500+ others by getting FREE email updates. You'll also find every post by category & every post in order.


13 Comments »
  • Mike says:

    I don’t know about this being the frugal generation. I’m frugal, many people I know think I do weird things to save a buck. I have friends in Gen Y who are struggling with credit card debt, car payments, and a spend-it-while-you-have-it mentality, to go along with a lot of student loan debt.

    I do think Generation Y has a lot more things competing for the dollar: Netflix, Hulu, YouTube, eBay, craigslist, amazon, daily blogs about anything and everything you want to know, free over the air digital TV, smartphones, tablets. All of this competition is keeping the price of entertainment low. Generation Y is full of smart consumers who know it is easy to find a lower price with the click of a mouse. Baby Boomers and Gen X didn’t have that option growing up.

    • AJ says:

      Mike, I think you make a great point. It’s much easier to spend a buck here or there buying a song or entire album, an app or a book with only one click. I would have to agree that there are many of us millenials who are trying to learn from our own mistakes and those of others, but unfortunately the ease of spending presents a problem that other generations never were never faced with. It’s even a challenge to those of us who are consciously trying to be smart with money.

  • Trevor says:

    I think Gen Y has grown up with Boomer parents who have pampered them to almost no end and haven’t really provided a good financial education to them. Now Gen Y are being met with a harsh reality that they realize they need to get in front of before it gets out of control. Luckily, Gen Y has a distinct advantage over previous generations, they have technology in their favor. Some may view the technology as a hindrance but I think it is actually a boon. It can be leveraged to find better deals on common items and services, it can be used to research different financial strategies, and hopefully help educate Gen Y on better financial decisions.

  • LC says:

    You mentioned this, but here are my top 3 reasons…student loans, student loans, and student loans!

  • garrett says:

    eh… i had more people in my high school (11th and 12th) than took this survey…

  • Interesting… I think I might be more Gen X than Gen Y, but my feeling is that people are getting less and less frugal as time goes on.

    Sure, there are pockets of folks that are embracing frugality and minimalism these days, but the world has changed a lot since I was a kid in the mid to late 70s and it seems that the younger people I know have more ingrained spending habits than I do. Certain things that seem essential to them, don’t seem essential to me.

    My guess is that this has a lot to do with their parents and how they grew up. When I was growing up, my parents didn’t have much (until later when I was a teenager and their wealth grew through really hard work). Even though we live very minimally, our son seems to have a lot more than we did at the same age.

    Anyway, this is not scientific at all, but just my general feeling about things. But, when I read the MMM forums and see all those young folks being super awesome and frugal, I’m reminded that there is hope! Then, I walk into the regular world and am reminded that most people don’t think (or act) that way at all…

    • G.E. Miller says:

      I agree. The list of “stuff” one is expected to accumulate has increased over time. Most of today’s “necessities” were not even around 20 or 30 years ago.

      Compared to Gen X and the Boomers, Gen Y TODAY may be more relatively frugal. Compared to other generations 20 years ago? Probably not, excluding a few.

      I do agree with Trevor that technology, which Gen Y has embraced more than any other, has driven education, researching, and comparison. We are the most informed consumers.

      I have hope (which is regularly stomped on). I can’t tell you how many times I’ve heard a Gen Y peer tell me they don’t have cable, don’t have TV, they bike to work, drive a surprisingly modest old beater car, moved into a tiny home, or buy their clothes from a thrift shop. I think we are reaching a unique point in time where the American dream is shifting from “get a plush corporate job so you can buy lots of nice stuff to fill your nice big house” to “be financially independent and be your own boss”. Dislike/distrust of banks, corporations, employers, and politicians are at all time highs, and that is no doubt a contributor.

      • Interesting. I do feel that as my peers get older, they spend more (or sometimes they spend a lot less). They seem to split into these 2 different groups. It would be interesting to compare the 2 groups based on similar income and age. The majority of my friends don’t spend much, but that’s probably because we have like interests. I also know plenty of folks my age that spend an amazing amount of money.

        My parents, being part of the baby boomer generation spent very little when they were in their 20s and 30s, but started spending more and more in their 40s, 50s, and now 60s. They spend a lot of certain things, particularly housing and eating out. It would be interesting to compare the groups at the same age, since age can change a lot of things.

        I did find this, which I thought was interesting: http://www.tnhonline.com/2.1559/unh-professor-studies-generation-s-shopping-habits-1.2725788#.T7FrvutYvV4

  • Ryan says:

    The spending behavior numbers are interesting, but without knowing if similar trends were exhibited in other age brackets it’s hard to make a generational conclusion. Perhaps the American population in general has become more frugal following the recession?

  • ML says:

    We’ve lived through the dot-com bubble, the Great Recession, and we also know we can’t rely on Social Security. Our generation cannot afford to be careless with money and need to start planning at a much earlier age if we hope to retire.

  • Rich says:

    Just a quick thought on the “importance of getting a deal”– with Living Social and Groupon-type sites, there is more access to “deals”. It’s a bit more sheik these days to get a lot for a little. Years ago, as Gen Xers were growing up and starting to access the internet, the deal sites weren’t so hot.

  • Jessie says:

    I’m a Gen Yer, and I’ve learned the hard way that nobody is here to help me with money but myself. I’m one of the thriftiest people I know for probably every single reason you’ve listed so far: environmental, anti-consumerism, simply can’t afford to buy things, etc. I take pride in saving instead of spending!

    To me though, probably the most personal reason is seeing my mother struggle financially because she is caught up in the consumerist lifestyle. She works so hard but spends so much that it will be a wonder if she will be able to retire before the age of 70. It’s sad, but I see it a lot in the Baby Boomers where I’m from (rural Oregon).

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