Last updated: Millennial spending habits: Budget minded, socially conscious

Millennial spending habits: Budget minded, socially conscious

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With Taylor Swift’s Eras Tour moving to Europe and boosting the economy there, the U.S. economy is staring down a “cruel summer” with lower-than-average growth predicted. One source whose contributions are steadily growing? Millennials.

Born between 1981 and 1996, they’re beginning to enter middle age and their peak earning and spending years. Here’s why brands should keep an eye on millennial spending habits right now:
  1. With over 83 million members in the U.S. alone, millennials are currently the largest generation in America’s history.
  2. Their retail purchasing totals $1.9 trillion over the course of 12 months.
  3. They spend about $70,000 per year, including housing. That’s just under the median millennial income of $71,566.
  4. Millennial consumers account for 28% of all retail spending in the U.S. That percentage is estimated to grow to 31% by 2030.
  5. Their annual spending is 5% more than the average U.S. consumer, and they spend more on retail than baby boomers and Generation Z (though 21% less than Generation X).

What all these numbers add up to is the fact that millennial spending is a significant contributor to the U.S. economy. Understanding their buying habits can help brands crack the code of millennial spending.

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Financial health shapes millennial spending habits

Compared to the other generations and their financial planning, millennials were more likely than any other generation to carefully budget their spending.

This may be due to economic constraints, like the cost of living being higher for them than other generations, and wages not keeping pace with inflation in America. Their money does not go quite as far as they’d like.

They’re often shouldering heavy debts like student loans since the cost of a college education has increased exponentially since their parents, the baby boomers, were in school. This debt discourages them from making big purchases like a home or car. Twenty-one percent of millennials have between $1,000 and $5,000 in savings, and 31% have less than $1,000.

They pay close attention to competitive pricing and are known to spend time researching brands and products before purchasing.

Millennials value experiences over things

One of the most notable shifts researchers have noticed in consumer behavior is how millennials prioritize experiences instead of goods and services.

Three out of four millennials polled in an Eventbrite survey said they would rather buy an experience instead of a product.

This spending habit sets them apart from their elder baby boomers and Gen Xers. Travel and dining out at restaurants, for example, are how millennials are choosing to spend their time AND money. One study found that 79% would eat at a popular restaurant compared to 66% of Gen Xers and 56% of boomers.

They prioritize comfort and convenience

Squarely in the digital native subset, millennials rely on tech and apps to make their lives easier or more convenient. They use ride-share apps like Lyft and Uber, food delivery apps like GrubHub and DoorDash, and more to save them a little time here and there, regardless of the slightly higher cost.

For example, if I want to order takeout from a restaurant downtown, I have two options: call and place my order, then get in my car and drive to the restaurant, park, and go in to pay and pick up my food. OR I can place my order via a food delivery app and pay a small fee to have it delivered to my front door (with contactless delivery of course).

Restaurants (especially small businesses) prefer the first option because they earn more on my order, but at the end of the day, I’ll keep choosing the option that gives me more time in my day.

Millennial habit: spend with purpose

Millennials prefer environmental, social, and governance (ESG) brands that are ethical, authentic, and transparent.

Seventy-five percent prioritize sustainability in their purchases and 62% favor products that show off their political and social beliefs.

To attract millennial buyers, it’s important to understand the difference between brands being good citizens, and brands making a cash grab with purpose-driven marketing (especially because the latter is currently experiencing a backlash). Things like dropping a DEI mention into your company values and slapping a recycle symbol on your product won’t cut it.

To be socially responsible as a brand means that a company is genuinely working to be a good citizen of society by implementing equitable hiring practices, prioritizing diversity in their workplace, offering fair and equal pay, and more.

ESG brands also want to be good citizens of the Earth by finding ways to offset their carbon footprint, reduce emissions, use recyclable or compostable materials for packaging and distribution, and fuel their operations with renewable energy.

When asked to indicate what issues brands should be weighing in on, 60% of socially conscious millennials named racial justice, 52% said income inequality, 39% said climate change, 37% said affordable healthcare, and 36% named LGBTQ+ rights.

Shopping physical stores vs. online

It’s interesting to note how this digitally savvy generation leans toward brick-and-mortar. One survey found that nearly 38% of millennials preferred primarily shopping in-store, while just 30% actually preferred online shopping.

Millennials may have a slight preference for in-store over online shopping, but e-commerce is still heavily supported by this generation. They search online for products, make purchases on their phones, and shop via social media sites like TikTok.

In 2023, a study found that 73% planned to spend the same or more online, making them the top online buyer among the generations.

Just like any generational group, it’s important to remember that generalizations regarding millennials are just that: generalizations. We can observe patterns and draw conclusions from research and behavior, but they don’t apply to ALL millennials. Different societal factors and environmental stimuli are at play, and people change.

Nonetheless, there’s opportunity in embracing these evolving spending habits. Recognizing and tapping into the immense spending power of millennials is a promising strategy for brands looking to bolster their bottom line, since millennial influence, much like millennial megastar Taylor Swift, is poised to shape the economic landscape for years to come.

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