Is Generation Y Emerging As Big Spenders?

Most people know that Generation Y is the next big “wave” of the population to move into “mature adulthood”. Depending on where you search and who you ask, Generation Y is made up of individuals born around 1980 to 2000 (some definitions extend it to 1978). The population of Generation Y exceeds the population of Baby Boomers and is the largest generation in history. We probably won’t know for certain the impact of the buying power of this population for another 10 years or so. Currently Gen Y still makes up only a small percentage of all spending but some interesting trends are emerging based on how this group uses their money compared to other generations on some higher cost items.

Cars

According to a J.D Power study Generation Y has less interest in owning an expensive car than previous generations. They are driving less and buying cheaper cars. Something that was once seen as an important status symbol for Baby Boomers and Gen X does not seem to carry the same weight with Gen Y.

Houses

At a recent National Association of Home Builders conference a survey was released showing that Generation Y home buyers cite finding a home within walking distance to their work as important and want less dependence on cars for getting around. This leads us into another trend in Gen Y spending. They have a different view on what type of house meets their “needs”. In an article earlier this year Rob Vogt, a partner at Vogt Santer Insights (a realty market consultancy firm) was quoted stating “The whole attitude (of homebuying) is changing.” “With Generation Y, there’s a trend toward moving away from the attitude of abundance.”  This is an important concept and not just when it comes to homes.

So where is Generation Y spending money?

Technology

 Generation Y has grown up during the fastest growing technological advances in history. For the most part, they have the latest phone, laptop and music device on the market. They use this devices to connect and express themselves. The desire to “keep up with the joneses” is no longer about owning the newest car and biggest house. Now its about having the newest phone and laptop.

Travel & Leisure

From 2007 to 2011 only ONE generation increased their spending on golf. While Gen X and Baby Boomers decreased their golf spending during this time period, Generation Y increased by a whopping 27%. This is a great example that Gen Y would rather allocate money towards experiences rather than cars and homes. According to the Adventure Travel Trade Association 82% of Gen Y travelers choose their destination before deciding on a travel budget. The also tend to stay at destinations longer, travel with more “purpose” (exploration and culture engagement).

I know the above are not the “end all be all” for figuring out what type of spenders Generation Y will turn out to be. They are not even close to hitting their core earning years. But, I do think the above shows some trends of what is important to younger adults. The tendency to spend more money on technology, travel and leisure than on pricey cars and huge homes could shape our economy in the coming decades.

This post originally appeared here.

Matthew B. Brock, CFP®
Senior Partner, Owner
Divergent Planning, LLC
www.divergentplanning.com 

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