Millennials aren’t just spending differently than their parents because of changing tastes — the generation also simply has less money to spend, a new study confirms.
The professional services firm Deloitte surveyed more than 4,000 U.S. consumers, and found that the average net worth of Americans aged 18 to 35 has dropped below $8,000 as housing prices, student debt and health care costs have ballooned.
“Typecasting the millennial as simply being ‘different’ overlooks a much bigger factor — that of their economic constraints,” wrote the authors of the study. “Millennials are dramatically financially worse off than previous cohorts.” Since 1996, the net worth of adults 35 and under has plummeted 34%, a decline the researchers link with several other demographic trends, including the shift toward marrying, buying homes and having children later in life.
Millennials are also better educated than prior generations — 39% have a bachelor’s degree or higher, according to Pew Research Center, compared with 24-25% of baby boomers — but those degrees are costing them: Student debt levels for consumers under 30 increased 160% between 2004 and 2017. Rent and health care costs have also risen, accounting for a greater share of total spending than they did two decades ago.
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In 1997, 25- to 34-year-olds spent 8% of their income on rent and 3% on health care, figures that rose to 10% and 5% by 2017, according to the Bureau of Labor Statistics.
For retailers that want to win with millennials — a generation that now accounts for 30% of the U.S. population — these trends are troubling, since they mean that even in a strong economy, today’s young people often have less to spend on discretionary purchases.
A separate Deloitte study, though, sheds light on at least one factor that can convince them to buy: social good. In a survey of more than 13,000 millennials around the world, 42% said they had initiated or deepened a relationship with a company because they believed it had a positive impact on society and/or the environment, and 37% said they would back away from a company they perceived to be behaving unethically.
Also, while higher-income consumers (with annual incomes of $80,001 or more) currently spend a greater share of their wallet online than lower-income consumers — 27% versus 18% — the latter segment represents a significant opportunity for e-commerce. Consumers making $35,000 a year or less are adopting online purchasing at a faster rate than higher-income groups, with spend growing 14% year over year, compared with 7% for high-income consumers.