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.
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?
2. Personal Debts are at All-Time Highs
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?