A Brief History of Generational Spending
Gallup published its survey of average daily spending by U.S. adults, according to their generation and annual household incomes. The results are interesting but not altogether surprising.
The Millennials (born 1980-1991) showed a similar spending decline from $92 in 2008 to $61 in 2009.
Generation X (born 1965-1979) retains the big spender trophy, at $110 daily spending in 2008, falling to $71 in 2009. Kids at home have a lot to do with that.
And who is the frugal generation? That would be our retirees born before 1930, spending only an average of $35 per day. Good for them. That generation could teach all the so-called frugalists a thing or two.
Now here is where it gets interesting: spending relative to annual household income. Even though the Millennials are spending on par with the Boomers, their reported annual household incomes are substantially less. For example, 40% of Millennials make less than $30k/year compared to only 21% of Boomers. At the other end of the scale, 38% of Boomers have annual household incomes in excess of $75k vs. only 18% of the Millennials.
Should we conclude that under the circumstances Millennials are overspending? We could blame it on having children, except that the oldest Millennials are only 29, whereas Boomers are now putting their kids through high school and college. Perhaps Millennials are loathe to look into the future and prefer to live only in the present? Or maybe they are truly financially enlightened and are following the principles of consumption smoothing. Probably not. I think they just like to entertain themselves and others, and I don’t mean by playing Scrabble.
What is the big picture take-away from this data? The folks at Gallup had this to say:
Given that consumer spending is the primary engine of the U.S. economy, it’s not clear how much the economy can grow unless spending increases from its current low levels. But spending may not necessarily be the best course of action for baby boomers as they approach retirement age and prepare to rely on Social Security and their retirement savings as primary sources of income. Indeed, the two generations consisting largely of retirement-age Americans consistently show the lowest levels of reported spending.
This commentary and the spending data are consistent with the views of Harry Dent on how our economy is entering an unstoppable demographic slide. I know that the Mr. ToughMoneyLove family is actively cutting routine spending and will continue to do so, no matter what happens on the income side. I have to believe that we are just two of millions of like-minded boomers.
If the economy needs more consumer spending to fully recover, the young folks will need to step up to the plate. But I wouldn’t recommend doing it just to take one for the team. You have to examine your own circumstances and protect your own future. Don’t worry about appearing selfish. Our federal government will step in and take some (or a lot) of what you have and spread it around to others. Sorry about that. Our generation is counting on that Social Security. We have to. We spent too much. We are slowing down now, but it’s too little, too late for a lot of our generation.
Look at it this way: Boomers were just showing you what not to do.
Photo credit: DJ Badly