Millennial Spending Habits

Millennials are very different from prior generations in many ways, which makes millennial spending habits peculiar. When it comes to their finances, they seem to be more interested than their parents and grandparents in using their money in ways that may benefit causes close to their hearts. So, they were more likely to buy from socially conscious businesses. However, this is more common in millennials without their own families. 

Millennials with families and those trying to advance their careers tend to be more like previous generations; however, this forms a smaller percentage. Thanks to their student loans and other debts, millennials often delay buying a house or having children.

Since millennials now outnumber other living generations, their priorities have become increasingly important to corporations that want to appeal to them to maximize profit margins. 

Millennial Spending Habits

Demographics

How are millennials defined? They currently make up about a fifth of the American population and encompass people between 25 and 41. They tend to have certain traits in common. These include:

• More likely than prior generations of the same age to be single. A 2020 Pew Research Center study estimates that about 56 percent of millennials are unmarried.
• More than 1 in 10 millennials are unmarried but live with a partner.
• The number of millennial women who have had a child is 55 percent, and the average number of children they have is 2.02.
• About 20 percent of millennial men are single parents.
• Three-quarters of the spouses of married millennials with bachelor’s degrees are also college graduates.

Millennial Spending Habits and Purchasing Power

Millennial net worth has grown 235 percent in the last four years, standing at over $8 trillion. Nevertheless, they still have less than 6 percent of the country’s overall net worth. In fact, for millennials born in the 1980s, their net worth is 34 percent lower than expected, thanks to economic recessions.

While their average income after taxes is close to $60,000, only 9.8 percent of their income goes into savings. Their average yearly spending is about $52,000. 

One reason for the low rate of savings is that the cost of college has grown so much that student loan debt is often crippling for this generation. The cost of housing is another factor. Millennials spend more than a fifth of their income on this expense. This is more than what Gen X and Baby Boomers have paid. 

Online Shopping Habits

Millennials are the first generation to grow up with the internet as a household convenience. Therefore, it’s no surprise that they have led the way in buying products online. They are attracted to online stores due to ease, comfort, and ability to rapidly scan for the best bargain. Additionally, they value the opinions of other shoppers, as over 40 percent of them will look at reviews before buying.

Before going to a store, millennials will often research or purchase the product online. One study found that 23 percent of this group bought something online before running to the store to pick it up. Many also prefer subscription services, even for groceries. 

 They are also concerned about their online security, particularly in recent times. Those who want to appeal to this demographic must realize they are pretty sophisticated and address these concerns to appeal to millennials.

 Some other unique characteristics of this generation include:

• Buying items using a smartphone – 42 percent of millennials have done this.
• About two-thirds of millennials worry that hackers could steal their personal information. 
• Only 9 percent of this demographic makes only in-store purchases.
• Almost half of the millennials regularly shop at Amazon.
• Sixty percent favor generic vs. name brands.

Brand Perception

 In general, millennials prefer to buy brands if they offer the following characteristics:

• A unique experience – millennials favor brands they perceive as sharing their values, including social and political views and lifestyle choices. Many millennials are concerned about the environment, which can factor into their decision-making process. They also favor brands that use clever or innovative messaging and are willing to respond to customers.
• Millennials do care about getting value for their money. Since they are often under financial pressure, finding bargains is essential to them. While this would imply that this demographic is less loyal to particular brands, it is not the case, as sixty percent of millennials say they are loyal to specific brands. 
• Customer service is important to millennials. Excellent customer service can lead to brand loyalty, but brands can also lose this loyalty. Ninety-six percent of millennials believe that loyal customers should be rewarded. A majority also likes rewards programs. These programs encourage this demographic to spend more on a particular brand.

Marketing and Advertising

Millennials are more responsive to social media campaigns than prior generations, as they are more comfortable with these platforms. However, they prefer clever and relevant advertisements. Ads should either appeal to their sense of humor or offer accurate and helpful information. This demographic prefers a source they find trustworthy. 

However, 47 percent of millennials use ad blockers on their computer, while 29 percent block ads on their phones. Overall, 30 percent of millennials won’t engage with online ads. Therefore, it might be better for advertisers to use famous figures like influencers with a large following or others perceived as leaders to pitch products. 

Millennials are 54 percent more likely to buy based on what an influencer recommends than prior generations. By comparison, just a quarter of this group says they are influenced by advertisements, though this same percentage is more likely to engage with such ads. 

Since millennials spend, on average, 211 minutes online per day, engaging with them in that space should still be a component of any advertising campaign. Those who publish online ads should prioritize making the visuals appealing. Ninety-two percent of this demographic prioritizes the appearance of an app in determining whether or not they feel comfortable giving up personal information. Since 77 percent of millennials have privacy concerns about their online data, this is quite important.

Debt

Millennials carry a great deal of debt. This includes student loan debt, car loans, and credit card debt. Over half of this demographic have stated that their debts have made it hard to save for a house. Student loan debt is particularly crippling, however, and many millennials say that taking out those loans was not worth it in retrospect.

• More millennials owe student loan debt than any other generation. 
• On average, millennials borrow almost $39,000 in student loans.
• This demographic’s total debt for student loans is over half a trillion.

Student loan debt is not the only problem for this group, though it is often the most significant component. On average, millennials have $4,712 in credit card debt, with older millennials having a larger debt burden than younger ones. 

It is no wonder that most millennials do not have any retirement savings set up. For 76 percent of this group, their debt burden makes it difficult to meet personal and financial goals.

Conclusion

Since millennials are such a large demographic in the United States, it’s become increasingly vital that companies and brands use strategies to appeal to them if they want to maintain or grow their presence in the economic landscape. While older generations often complain about millennials, the reality is that they are pioneers in many areas, such as online purchases and using social media platforms. Studying millennial spending habits can help trace trends of future generations’ behaviors.

Unfortunately, this group often carries a large student loan burden. Because their debt load can often hamper their financial dreams, the Consumer Protection Group offers unique services for millennials and other groups to better manage their debt. We understand our clients’ needs and how daunting it may seem to overcome this hurdle. We are ready to help you so you can achieve financial freedom. Contact us for compassionate and knowledgeable help.