Millennials have different priorities when it comes to spending compared to the older generation. They don’t spend their money on homes or cars. Instead, they want to invest in personal experiences. Their spending priorities have led to the success of startups such as Airbnb and Uber.
Instead of buying cars, watches, and appliances, Millennials are touring different countries, renting scooters, going to music festivals, or experiencing the great outdoors. That’s the reason why companies are looking for ways to offer experiential packages to their customers.
The good news is that young people today are good at saving. However, they have different goals when it comes to using their savings. They plan for financial freedom, instead of for their retirement. They want to enjoy their desired lifestyle instead of preparing for the time that they stop working.
Millennials are willing to do whatever it takes to be financially independent, even if they need to work for their rest of life. Some of their priorities include travel, dining, and fitness. A secure financial future is the least of their worries.
Not Buying Enough Clothes
While there are some people spending money on branded items, most Millennials don’t care about the latest fashion trends. Most of them would rather spend their money in thrift shops than purchase new items from a department store.
They might buy a couple of shirts with cool designs when they have extra money. However, clothes are not on top of the Millennials’ priority list.
Millennials love to travel. They want to experience new places, do new things, or find themselves in a foreign land. Instead of working hard to save money for a better life, they feel it’s better to spend money to take a break from their daily routine occasionally. That’s also the reason why they don’t buy as many cars as other generational groups did.
Young people today love to travel instead of saving up for a house of their own. More often than not, they will say that their travels provided them with a unique experience. They save for their trip and try to live as frugally as possible once they get there. They don’t stay in five-star hotels, but, instead, find a cozy house or even a room in Airbnb.
Millennials are also satisfied in documenting their travels on their social media accounts. They also take inspiration from the photos taken by other people who have visited the same place before them.
No to Cars and Houses
As stated before, they don’t prioritize buying cars. Instead, they ride their bikes to work or book a ride from a ride-sharing app. Another reason why they don’t buy cars is to reduce their carbon footprint. They hate pollution, which is why they try their best not to contribute to the problem.
Millennials don’t buy homes because they want to move whenever they choose. Job opportunities allow the younger generation to move from one place to another. Another reason why Millennials forego buying their own house is the high cost. They can’t afford to buy one without going into debt.
The younger generation views ownership differently than the elder generations did. Most young adults today see owning a home and a car as a major commitment. Instead of spending on living in a home, they use their money on events and experiences.
Do What They Love to Do
For Millennials, money is not everything. They would not sacrifice their health, family, or friends for making money. For most of them, money is only a tool that can make experiences possible.
Although they might just be thinking ten years in the future, young people are saving. They even set aside a greater portion of their incomes compared to the older generations. Millennials save more than a third of their income for short-term goals.
The bad news is that most of them have less than $1,000 in their savings account. They might know how to save, but they also use up their money on short-term goals. They spend money on the latest gadget, eat at the new restaurant, or go on a trip.
Despite using their money liberally, the young generation is more planning-oriented than previous generations. Around a third of them have a financial plan; they even consult professionals to make it. In general, they also update their plans once a year.
The younger crowd also knows how to monitor their accounts, as well as the fees they pay. However, their short-term spending habits might damage their long-term plans.
Factors Stopping Millennials from Saving for Their Future
Millennials working for a company with a 401 (k) plan and a good match initiative should be able to save for their retirement, right? However, they have many short-term plans that compete with their savings. They don’t know what to cut from their budgets in order to save in their retirement funds.
- Student Loan
A student who graduated from college in 2014 has an average debt of $33,000. When adjusted for inflation, the amount is twice that of the graduating class of 1994. The cost of living increases each year as well, and that’s why most Millennials want to pay off their quick approval loans first before saving for their future. They feel that they will have achieved financial freedom once they paid off their college debt.
- Small Purchases Add Up
Those daily cups of coffee can add up when they become routine, though, but buying coffee is not the real problem. The problem is the act of mindless spending. Millennials might have a financial plan, but they don’t actually stick to it. Instead, they adjust it each year to include those small purchases.
The best way to stop mindless purchases is to create a budget. When you stick to a budget, you can still enjoy those cups of coffees. You know your cash flow and can avoid living from one paycheck to another.
- Fear of Missing Out
Social media has made it easier for people to share their experiences. However, it also led to the fear of missing out. As a result, Millennials want to experience what others in their circle have already experienced. If you are at an event, chances are you see people recording their experiences through their smartphones.
The older generation might think that Millennials are struggling to make ends meet because of bad spending habits. However, the truth is that they are saving the little money they have in the bank so that they can use it for their own types of spending priorities. The world has changed, and older folks should accept that the new generation doesn’t want to play by the same rules used by the previous generations.