Most millennials — that is, anyone born between the years of 1981 and 1996 — have been in the workforce for some time now, advancing in their careers and building their income.
Some people in this generation have started seeing significant financial success, though many still struggle in this area due to factors both within and outside of their control. Those who have accumulated some wealth and now have more discretionary income at their disposal tend to share certain money-saving and spending habits that affect their financial success and well-being.
While everyone’s situation is different, even within one generation, here’s how wealthier millennials typically spend their money — and the key factors that have affected this generation’s ability to build wealth.
“Millennials with disposable income prioritize experiential purchases over material possessions, such as luxury goods,” said Natalie Warb, financial expert at CouponBirds.
Sigita Kotlere, CEO at nectaro, seconded this by saying, “Millennials with substantial discretionary income often prioritize spending on experiences rather than material possessions. Travel, dining out and entertainment are the most popular choices.”
Another key area where millennials tend to spend their money is technology.
“Technological advancements captivate millennials,” Warb said, “resulting in a propensity to purchase emerging gadgets such as smartphones, tablets, wearable fitness trackers and innovative robotics.”
Health-Conscious and Sustainable Purchases
Many millennials buy eco-friendly or sustainable purchases, as well as products or courses that can contribute to their own physical, mental and emotional well-being.
“Millennials prioritize their healthcare and well-being,” Warb said, “willingly allocating funds towards fitness classes, outdoor gear, organic food and personal care products.”
Kotlere added, “Sustainable and socially responsible products have gained [traction] among this generation.”
An example of this includes sustainable clothing brands.
“Millennials spend less on personal transportation and choose public transportation or bicycles, thus saving a large amount of their income that would have been spent on commuting,” Kotlere said.
On the other hand, many wealthy millennials also might be turning to eco-friendly vehicles. While these are often more expensive than other transportation options, they’re also generally considered better for the environment and can lead to greater savings in the long run.
For both millennials and Gen Z, convenience has a lot of value. Because of this, many individuals with a significant amount of disposable income spend it on things like streaming, rideshare and delivery services.
Factors That Impact Millennials’ Financial Success
Every generation has its share of challenges when it comes to achieving financial success, and millennials are no different. However, this generation has faced specific challenges — both related to their money habits and external factors beyond their control — that have affected their overall financial success and well-being.
Here are some of the biggest ones.
Global Financial Crisis
A large percentage of millennials entered the job market right around the economic uncertainty that came with the financial crisis in 2008. This — combined with other factors like the COVID-19 pandemic, high inflation, mass layoffs and expensive education — has caused many to struggle financially.
“The poor fiscal response after the global financial crisis was the most significant factor keeping millennials from achieving financial success,” said Ryan Graves, president at Bemiston Asset Management. “The labor market took a long time to heal, and there were missing rungs on the corporate ladder to build a career. Combining rising college tuition and the need for a degree to acquire a job creates an economically disadvantaged generation.”
Cost of Higher Education
According to Pew Research, more millennials (39%) than older generations have obtained a bachelor’s degree or higher. But at the same time, millennials also tend to owe more in student loans than earlier generations.
“Many millennials carry substantial student loan debt, affecting their capacity to save and invest,” Kotlere said.
Warb added, “The exorbitant cost of higher education and the burden of student loan debt present significant challenges for millennials seeking financial progress.”
Cost of Housing
While older generations tended to build wealth through real estate, skyrocketing housing prices have limited many millennials’ ability to do the same.
“Rising prices in the market have made it harder for millennials to afford homes, thus limiting their ability to build home equity,” Kotlere said.
As for those who have purchased homes, interest rates are another major factor that affects their ability to build wealth and a financially stable future.
“The housing market will create a bifurcated class of millennials: those who obtained a mortgage at 3% or below and those who will pay over 7%,” Graves said. “The millennials less burdened by their mortgages have a clear economic advantage going forward, similar to those who had their college covered by parents or scholarships.”
Higher Earnings and Career Progression Contribute to Success
The youngest millennials right now are in their mid-20s, while the oldest are in their early 40s. What this means is that many people in this generation are starting to progress in their careers and earn more money.
“Millennials are entering their prime income-earning years,” Graves said. “The malaise after the financial crisis is gone. The labor market is still hot; workers can capitalize on pay raises or new jobs.”
In many cases, these higher incomes and better job opportunities have given millennials the chance to save more money or spend it on the things they couldn’t before.
“Millennials have delayed many things, such as starting a family, buying a house or taking that dream vacation,” Graves said. “Now that millennials earn more, they spend on everything they feel they missed.”
On the other hand, the wage gap continues to increase. This has made it harder to achieve financial success or stability.
“The job market has improved since the recession and rebounded since the pandemic,” Kotlere said. “However, millennials still face wage dissatisfaction, and many earn less than they wish they would. The financial reality of the hefty student loan debts that this generation is carrying, as well as [the] overall changing economic situation … creates an overall picture of why millennials are called the ‘unluckiest’ generation when it comes to financial stability.”
Technology and Investments Also Help Build Financial Success
There are many ways millennials (and other generations) can achieve financial stability. One of the big ones is to implement technology to manage one’s finances and build wealth. To do this, Warb suggested “leveraging technology-driven financial management tools, including digital banking services, expense tracking software and online shopping utilities.”
Kotlere added, “Since millennials are tech-savvy, they are the first generation to start actively investing … rather than relying on salaries and social benefits. Therefore, they lean towards various investment opportunities.”
While investing and using technology can help millennials become financially successful, it’s important to consider the risk involved, as well as one’s own goals and financial situation.
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