Millenials: the cheapest generation (Yay?)

[Charm14]

I wasn't quite sure where to put this article, since it has aspects of mustachian and anti-mustachian. Overall, I think it leans towards mustachian, so here it is:http://www.theatlantic.com/magazine/archive/2012/09/the-cheapest-generation/309060/


Here are a few interesting quotes from the article:
"Millennials have turned against both cars and houses in dramatic and historic fashion. Just as car sales have plummeted among their age cohort, the share of young people getting their first mortgage between 2009 and 2011 is half what it was just 10 years ago, according to a Federal Reserve study.
Needless to say, the Great Recession is responsible for some of the decline. But it’s highly possible that a perfect storm of economic and demographic factors—from high gas prices, to re-­urbanization, to stagnating wages, to new technologies enabling a different kind of consumption—has fundamentally changed the game for Millennials. The largest generation in American history might never spend as lavishly as its parents did—nor on the same things."

And, along the same vein as MMM's idea to store things on Craigslist:
"For decades, inventory manage­ment was largely the province of companies, not individuals, and continual efforts to reduce inventory—the stock of things just sitting around—helped companies improve their bottom line. But today, peer-to-peer software and mobile technology allow us all to have access, just when we need it, to the things we used to have to buy and hold."

"If the Millennials are not quite a post-­driving and post-owning generation, they’ll almost certainly be a less-­driving and less-­owning generation."

And the conclusion:
"Ultimately, if the Millennial generation pushes our society toward more sharing and closer living, it may do more than simply change America’s consumption culture; it may put America on firmer economic footing for decades to come."


If this article is accurate, it would mean more opportunities for the landlord MMMers here.
One thing I disagree with is the "phone as the new status symbol" idea. Except among a few really tech-savvy people, a brand new phone isn't that big a deal. Even if you're one of the people who wait in line for the new i-whatever, you only have exclusivity for a few days before they start showing up everywhere. Plus, they're just too hard to show off, unless you're gauche enough to brag about it. The iPhone 6 looks pretty much the same as the 5, and the 7 will probably look the same too. Also, owning an iPhone doesn't make you 'special', because so many other people have them too. With cars, most people will recognize either the exact make and model, or the brand (Ohh, a Mercedes, must have been expensive!), or at least (if you're like me, anyways) think that it looks expensive. Phones are nice, but they can't be showed off the way that a car can. And you have to replace them every six months to stay up-to-date. With a car, certain models become even more show-off-able with age!

Any thoughts on the article?

[Middlesbrough]

My comments are more about your analysis. I think phones are huge status or social symbols. My office is constantly a chatter box about the latest iphone or android device. My coworkers are constantly upgrading and comparing phones. It gets kind of ridiculous.

[deborah]

In Australia first home buyers have declined dramatically in recent years, which would tend to agree with the US article you quote. However, economists have been looking at the figures, and all is not as it seems. Firstly, parents are often buying houses with their children, so even though the house is for a first home buyer, they are not classified as such. Secondly, first home buyers are identified in a particular way which eliminates sectors of buyers. Upon initial review it appears that there are about the same numbers, or more.

Is it possible Millennials receive more financial support from their parents than previous generations?

[RootofGood]

Sounds pretty cool.  Maybe it's a generational backlash against owning tons of shit like their parents do.  I've certainly looked at how my parents live and made some intentional choices that are 180 from what my parents have done in terms of owning possessions (and they are pretty frugal already!). 

Among my 30-ish friends, there seems to be a trend toward the smaller and more practical and an emphasis on living a better life and not necessarily acquiring more stuff. 

Or maybe I've jettisoned those friends who are boring individuals that live life like it's a "stuff quest" to see who can accumulate the biggest shiniest pile before entering the big IKEA in the sky. 

[cbr shadow]

As far as phones go, there's only so far you can upgrade.  The receptionist in my office likely makes $35k salary but has the latest Iphone.  The VP in my office probably makes $200k+ and has the same phone.  With cars or handbags the sky is the limit for what you can spend, but it seems the very best phone (Iphone or Android) is $500-$600 and then you're good for at least a year.
I'm not saying I agree with getting the best phone, I'm just making the argument that it'snot a status symbol if even people near the poverty line can fairly easily afford to get one.

[Apples]

Student. Loans.  It's tough to get yourself into a bunch of car and house debt a few years out of school when you already have 5 figures worth of debt with no collateral against it.  Those things will seriously slow down our generation.  In addition to the urbanization making it less of an actual need to have a car and putting home ownership off the table for many young people.  But when people my age (mid 20's) move home to rural/suburban areas in 10 years to have kids, I wonder if we'll sort of "catch up" to our parents ion terms of buying cars/houses.  A lot of my friends live in urban areas now, but want to move when they have kids in 5-10 years.  But I don't think data from 2009-2011 is a great indicator; most people fresh out of college were having a difficult time getting and keeping a job, let alone looking to buy an asset that had just dropped significantly in value.

[iris lily]

As far as phones go, there's only so far you can upgrade.  The receptionist in my office likely makes $35k salary but has the latest Iphone.  The VP in my office probably makes $200k+ and has the same phone.  With cars or handbags the sky is the limit for what you can spend, but it seems the very best phone (Iphone or Android) is $500-$600 and then you're good for at least a year.
I'm not saying I agree with getting the best phone, I'm just making the argument that it'snot a status symbol if even people near the poverty line can fairly easily afford to get one.

Good point. So, Millenniasl are going to be a flat, egalitarian society because the things that they value are what 90% of the population will have. No "phone gap" (like the "wealth gap."  Cool!

[BlueMR2]

Hasn't hit our area I guess.  The Millenials around here are making the same mistakes we did at that age, but the consequences are higher.  Student debt loads are higher, but they're still buying new houses and nicer, newer cars than the older people I work with.  Plus the multi-hundred dollar a month phone bills and high-speed internet/tv combos.  The younger folk that I know are on an even worse course than we were.  It's very discouraging.

[MoneyCat]

I hope Millennials rent instead of buying houses, because I will buy the houses and they can give their money to me in the form of rent.

[Left]

not sure i would call my generation cheap. there's a difference between choosing to spend money and not having it to spend. I make okay money and choose to save for the future. Others don't save so they aren't cheap but overspend on cheaper items at the cost of expensive ones. Even others just can't afforf them and not by choose.

[MrsPete]

Thinking about the high school students I've taught over the years, I do see some differences in their spending and wants: 

- They are still clothing-crazy, but they're less brand-oriented in their clothing choices; for example, they're fine with buying Target shirts . . . but buy them they will.   They're fine with used items.  Why is this significant?  Well, because they're young, clothing is something they can afford on their part-time student salaries.  It may be an indication of how they'll spend on big ticket items when they have larger salaries. 

- They go hog-wild on accessory spending.  $100+ for a pair of shoes?  Well, if they really want them, yeah.  The girls are quick to spend big on purses and cute phone covers (okay, I think the phone cover is a sensible choice to protect an expensive gadget, but you don't need a collection of them).  But the traditional letter jacket?  No thanks, I'll just take my letter home and put it in a drawer.  A $40 hat?  Yeah, I want one!   

- They still want cars.  Want cars badly, especially boys.  Girls don't want to date guys who have to borrow Dad's car.  This hasn't changed since I was in high school.  At my daughter's college, almost every student has a personal car (as a freshman and sophomore, she was literally the only kid in her social group who didn't have a car); whereas, when I was in college years ago, I was absolutely not alone in being car-less.  What has essentially disappeared as a status symbol, though, is the car stereo; that used to be big -- now kids listen to music on their cell phones.  Admittedly, we live in an area with no public transportation, so I'd believe it'd be different in the big cities. 

- They eat out more.  LOTS, LOTS more.  I'd estimate my average high school senior probably eats fast food 5-7 times a week, and by that I mean on the way to/from school or with friends -- I'm not talking about eating dinner out with his family.  They are quick to spend on fast food and Starbucks type drinks.

- But nothing even comes close to the cell phone as a status symbol.  In my senior classes only TWO kids do not have a smart phone.  That's out of 90 students.  Some of them are old-styles, some of them have cracked screens, but they pretty much all have them.  Occasionally a student gets his service turned off and will still carry the non-functional phone; not to have it is social suicide.  Yes, they pull them out constantly, flash them around in a show-off way that makes me roll my eyes, talk about who has the newest iPhone, share videos of friends, etc.  Most of these high school seniors have part-time jobs, and they pay a portion of their phone cost themselves -- but most would be willing to cut out a whole lot of other stuff before they'd give up that phone. 


No, Millenials aren't the cheapest generation -- not by a long shot.  They're pretty spendy from what I see. 

[Sid Hoffman]

I don't think data from 2009-2011 is a great indicator; most people fresh out of college were having a difficult time getting and keeping a job, let alone looking to buy an asset that had just dropped significantly in value.

Exactly what I was going to say, but I'll also add that because the financial industry was a mess, a lot of people simply could not get a mortgage at that time, regardless of their credit rating unless they put 20% down.  This took first time home buyers right out of the running.  Even if they wanted to buy a house, they could not do so once the housing industry melted down.  Only by 2011-2012 did prices stabilize and lending only just started to return to normal for first time (under 20% down) home buyers.

[ender]

Something tells me the author of that article is mixing causation with correlation.

If you eliminate "inability to buy" from the list of reasons millennials are not buying then I doubt the "cheapest" part would even remotely hold true.

Nine out of 10 Millennials say they eventually want a place they own, according to a recent Fannie Mae survey. But this generation’s path to home­ownership is fraught with obstacles: low pay, low savings, tighter lending standards from banks. Student debt—some $1 trillion in total—stalks many potential buyers as they seek a mortgage (or a car loan). At a minimum, homeownership rates are highly unlikely to soon return to the peaks they hit during the housing bubble.

I expect the average millennial spends equal if not more inflation adjusted dollars by the time they are 30 as someone 30 years ago... average student loan debt is really high...

[4alpacas]

Student. Loans.  It's tough to get yourself into a bunch of car and house debt a few years out of school when you already have 5 figures worth of debt with no collateral against it.  Those things will seriously slow down our generation.  In addition to the urbanization making it less of an actual need to have a car and putting home ownership off the table for many young people.  But when people my age (mid 20's) move home to rural/suburban areas in 10 years to have kids, I wonder if we'll sort of "catch up" to our parents ion terms of buying cars/houses.  A lot of my friends live in urban areas now, but want to move when they have kids in 5-10 years.  But I don't think data from 2009-2011 is a great indicator; most people fresh out of college were having a difficult time getting and keeping a job, let alone looking to buy an asset that had just dropped significantly in value.

As I was reading the article, I kept thinking about student loan debt.  I wonder how the debt situation plays out with this data set.  I'm sure someone has done an analysis, but it did get a small mention in the article.

Nine out of 10 Millennials say they eventually want a place they own, according to a recent Fannie Mae survey. But this generation’s path to home­ownership is fraught with obstacles: low pay, low savings, tighter lending standards from banks. Student debt—some $1 trillion in total—stalks many potential buyers as they seek a mortgage (or a car loan). At a minimum, homeownership rates are highly unlikely to soon return to the peaks they hit during the housing bubble.

[gimp]

I agree with what others folks have said.

- Student loans. Okay, most people don't graduate with 200k in debt, but still, 30k means you're paying around $350-500 a month on a 10-year repayment plan. That's 350-500 a month that would otherwise be saved for cars and houses, or spent on whatever else.

- Job opportunities. There is no denying that people love to whine, but there's also no denying that jobs require more and more qualifications for the same (or less) pay and position than they did ten, twenty, thirty years ago. More investment required, meaning less return. Folks starting to enter the workforce later and later, that's opportunity cost (could be a hundred grand or more in missed earnings) plus less time to save before feeling more intense pressure to buy the houses and cars.

- My theory: the ability to apply online to jobs is a boon, but also a curse in that noise is massively increased. If before you had a hundred people and a hundred positions, maybe each position had five or ten applicants - now it will have thirty or fifty or ninety-five, because the barrier to application is so low (both in terms of finding the job and in applying to it.) One of the results is that hiring managers are even more eager to circumvent the whole process by finding someone who comes recommended - which makes it harder for those who aren't. That's not new, but I think it's gotten worse, but I don't have numbers to back this up.

- And people just entering the market right now saw the 2008 downturn quite recently, and its years-long effects that aren't entirely abated yet. They may wisely be more cautious about spending.

[VirginiaBob]

Speaking of the millenials I work with, they spend high on housing as soon as they can, they invest well.  Buying individual stocks appears to be the norm versus index funds, and they all seem to be doing well with it (although most people report winners and not losers, so who knows), the latest smartphones on a contract are must, don't seem to care about fashion more than other generations anyways, they appear to spend a lot on leisure activities.  Cars appear to all be gifts from parents.  They are still on parents health insurance plans, so savings is captured there.  In general, it appears that parents help fund them for lots of things (such as above mentioned smartphone contracts).  No student loans - appears that parents/grandparents all paid for thier educations.  Not sure if any of this is the norm

[Neustache]

From what I can tell, dependence on Mom and Dad is typical in millennials (and I'm not saying it's a bad thing, just different).  I am incredibly independent...younger sister, not so much.  My husband is independent...his younger brother, not so much.  There's 5 years difference between us and them, and so we tend to be in that nebulous not really Gen X but not a millennial category, and they fall into the millennial category.   Or it's a birth order thing - we are middles and they are the youngest children. 

I can't decide if relying on mom and dad for babysitting while working, extended insurance plans and the like is good or bad.  Sometimes I think my independence is a bad thing as it keeps me from accepting help even when it's needed.  But at the same time, I sometimes wish parents would pull the plug a little sooner, although I realize this is a very American (or was!) mindset. 

[otherbarry]

- They eat out more.  LOTS, LOTS more.  I'd estimate my average high school senior probably eats fast food 5-7 times a week, and by that I mean on the way to/from school or with friends -- I'm not talking about eating dinner out with his family.  They are quick to spend on fast food and Starbucks type drinks.

There was just something about being able to stop for breakfast on the way to class, it made your whole day better.