Millennials Making More Happen With Less [Chart]
Recent survey sheds light on millennial spending habits
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Despite the Western world’s general shift towards healthier eating, it may surprise you to learn that McDonald’s shares traded at all-time highs just days ago.
How is this possible?
Part of the reason is that although millennials will tell you otherwise, the name of the game for courting many millennials is still convenience. Price points at a restaurant such as McDonald’s still have wide appeal to a cash-strapped generation.
Based on a recent survey by TD Bank, the convenience trend is still on track. Here’s what we learned on millennial spending habits from the results.
Getting More out of Less
A major finding of the survey was that although millennials “go out” twice as often as Generation X and three times as often as Baby Boomers, they spend less per month on purchases than their older cohorts.
Millennials made more purchases on retail goods and dining than other generations, but spent less money overall. In fact, the only category where Millennials spent more than Gen X and Boomers is on coffee and fast food – demonstrating a need for food on the run and frequent doses of caffeine.
The average millennial went out 13 times each month, spending $103 for an average of $7.90 per transaction. This compares with nine trips with $122 of spend ($17 per transaction) for the average consumer.
The same was the case for grabbing “coffee and food on-the-go”, where millennials said that they went on more trips than the average consumer. Millennials also spent a higher total than others, spending $80 over 11 trips (compared with $67 over eight for the average consumer).
Experiences vs. Material Items
While the survey paints a picture of millennial thriftiness, we also think that there is another lens that can be used to shed light on the results. In particular, we believe this shows that the value that millennials place on having experiences.
To many millennials, “going out” is as much about the experience as the material food itself. Whether it is connecting with old friends at a new thin-crust pizzeria or trying a locally-roasted single-origin coffee with a significant other, it’s often more about sharing an experience with good company. It doesn’t have to be a fancy dinner or involve a $100 bottle of wine purchase to count as quality time.
This could be a partial reason behind a higher frequency of trips out, even though less money gets spent overall.
Cash vs. Credit
A final point of interest from the survey lies in the difference in how millennials make discretionary purchases.
On average, Americans spend $4,700 per year with a credit card, and $2,400 with cash, a debit card and checks for discretionary purchases. Millennials tend to use cash, a debit card and checks more often ($5,200) and charge 22% less ($3,300) than the average consumer
Millennials, many of whom grew up during the Financial Crisis, are more averse to debt. This is corroborated by the results of a different survey showing that seven out of 10 millennials say they would prefer to use a debit card, rather than a credit card, for their purchases.
It’s also an attitude that we’ve covered in a previous chart of the week, where we showed that only 37% of millennials were confident in managing their credit, while 70% of millennials hold their savings and investments in cash.
Charting The Growing Generational Wealth Gap
How large is the wealth gap between Millennials, Gen X, and Baby Boomers? We visualize the growing wealth disparity by generation and age.
The Growing Generational Wealth Gap
As young generations usher into adulthood, they inevitably begin to accumulate and inherit wealth, a trend that has broadly remained consistent.
But what has changed recently is the rate of accumulation.
In the U.S., household wealth has traditionally seen a relatively even distribution across different age groups. However, over the last 30 years, the U.S. Federal Reserve shows that older generations have been amassing wealth at a far greater rate than their younger cohorts.
As the visual above shows, the older have been getting richer, and the younger have been starting further back than ever before.
By Generation: Baby Boomers Benefit & Millennials Lag
To examine the proportion of wealth each generation holds, it’s important to clearly define each age group. Though personal definitions might differ, the U.S. Federal Reserve uses a clear metric:
|Generation||Birth Years||Age (2020)|
|Silent Generation & Earlier||1945 and earlier||75+|
Relative to younger generations growing up, the Silent Generation and Greatest Generation before them have seen a decreasing share of household wealth over the last 30 years.
However, the numerical levels have been relatively stable. For these combined generations, total wealth has gone from $16 trillion in 1989 to $19 trillion in 2019, with a peak of $27 trillion in 2007. Considering this cohort has understandably shrunk over time—from an estimated 47 million to 23 million in 2019—their individual shares of wealth have actually increased.
Immediately following are the Baby Boomers, who held more than half of U.S. household wealth towards the end of 2020. At $59 trillion, the generation holds more than ten times the amount held by a comparative number of Millennials.
|Generation||Wealth (2019)||Population (2019)||Wealth/Person|
|Silent Generation & Older||$18.8 Trillion||23.0 Million||$817,391|
|Baby Boomers||$59.4 Trillion||71.2 Million||$834,270|
|Generation X||$28.6 Trillion||65.0 Million||$440,000|
|Millennials||$5.0 Trillion||72.6 Million||$68,871|
With $29 trillion held in 2019, Generation X has also been gaining in wealth over the last 30 years. It’s good enough for five times the wealth of Millennials, though at just $440k/person, they’ve fallen far behind Baby Boomers in rate of growth.
Finally, trying to catch up to their older cohorts are Millennials, who held the least amount of household wealth ($5 trillion) for the greatest population (73 million) in 2019, an average of just under $69k/person.
For a direct comparison, it took Generation X nine years to climb from their start of 0.4% of household wealth in 1989 to above 5%, while Millennials still haven’t crossed that threshold. But it’s not all doom and gloom for Millennials. Their rate of growth is starting to rise, with the generation’s level of wealth climbing from $3 trillion in 2016 to $5 trillion in 2019.
By Age: A Growing Share for 55+
Though the generational picture is stark, the difference in U.S. household wealth by age makes the picture of shifting wealth even clearer.
Until 2001, the shares of household wealth held by different age groups were relatively stable. People aged 40-54 and 55-69 held around 35% each of household wealth, retirees aged 70+ hovered around 20%, and younger people aged under 40 held around 10%.
Since that time, however, the shift in wealth to older generations is clear. The 70+ age group has seen their share of wealth increase to 26%, while the share held by ages 55-69 has grown from 35% to almost half.
But not all ages are seeing an increasing slice of wealth. The 40-54 age group saw its share drop sharply from 36% to 22% between 2001 and 2016 before starting to recover towards the end of the decade, while the youngest cohort now hover around just 5%.
Breaking down that wealth by components is even more eye-opening. The 39 and under age group holds 37.9% of their assets in real estate, the largest share amongst any age group (and concentrated in the hands of fewer people) while older age groups have their wealth spread out across real estate, equities, and pensions.
|Assets Held by Age (Percent of Total, 2020)||70+||55–69||40–54||≤39|
|Corporate equities and mutual fund shares||24.6%||23.1%||18.6%||8.1%|
But the difference is as much in assets as it is in opportunity. In 1989, Baby Boomers and Generation X under 40 accounted for 13% of household wealth, compared to just 5.9% for Millennials and Generation Z under 40 in 2020.
Will the Tide Turn for Generation Z?
As new and accumulated wealth has been built up in older generations, it’s a matter of time before the pendulum starts to swing the other way.
The Millennials age group are expected to inherit $68 trillion by 2030 from Baby Boomer parents. Of course, that payout isn’t going to be even across the board, with wealthier families retaining the bulk of wealth and the majority of Millennials laden with debt.
And with Generation Z (born 1997-2012) starting to come of age, the uneven playing field is making it hard to begin accumulating wealth in the first place.
Since it is in the best interest of societies to have wealthy generations that can drive economic growth, potential solutions are being examined all over the political sphere. They include different taxation schemes, changing estate laws, and potentially cancelling student debt.
Whatever ends up happening, it’s important to track how the distribution of wealth changes over the coming decade, and begin accumulating your personal wealth as best as you can.
Ranking Asset Classes by Historical Returns (1985-2020)
What are the best-performing investments in 2020, and how do previous years compare? This graphic shows historical returns by asset class.
Historical Returns by Asset Class (1985-2020)
Mirror, mirror, on the wall, is there one asset class to rule them all?
From stocks to bonds to alternatives, investors can choose from a wide variety of investment types. The choices can be overwhelming—leaving people to wonder if there’s one investment that consistently outperforms, or if there’s a predictable pattern of performance.
This graphic, which is inspired by and uses data from The Measure of a Plan, shows historical returns by asset class for the last 36 years.
Asset Class Returns by Year
This analysis includes assets of various types, geographies, and risk levels. It uses real total returns, meaning that they account for inflation and the reinvestment of dividends.
Here’s how the data breaks down, this time organized by asset class rather than year:
|U.S. Large Cap Stocks||U.S. Small Cap Stocks||Int'l Dev Stocks||Emerging Stocks||All U.S. Bonds||High-Yield U.S. Bonds||Int'l Bonds||Cash (T-Bill)||REIT||Gold|
*Data for 2020 is as of October 31
The top-performing asset class so far in 2020 is gold, with a return more than four times that of second-place U.S. bonds. On the other hand, real estate investment trusts (REITs) have been the worst-performing investments. Needless to say, economic shutdowns due to COVID-19 have had a devastating effect on commercial real estate.
Over time, the order is fairly random with asset classes moving up and down the ranks. For example, emerging market stocks plummeted to last place amid the global financial crisis in 2008, only to rise to the top the following year. International bonds were near the bottom of the barrel in 2017, but rose to the top during the 2018 market selloff.
There are also large swings in the returns investors can expect in any given year. While the best-performing asset class returned just 1% in 2018, it returned a whopping 71.5% in 2009.
Variation Within Asset Classes
Within individual asset classes, the range in returns can also be quite large. Here’s the minimum, maximum, and average returns for each asset class. We’ve also shown each investment’s standard deviation, which is a measure of volatility or risk.
Although emerging market stocks have seen the highest average return, they have also seen the highest standard deviation. On the flip side, T-bills have seen returns lower than inflation since 2009, but have come with the lowest risk.
Investors should factor in risk when they are looking at the return potential of an asset class.
Variety is the Spice of Portfolios
Upon reviewing the historical returns by asset class, there’s no particular investment that has consistently outperformed. Rankings have changed over time depending on a number of economic variables.
However, having a variety of asset classes can ensure you are best positioned to take advantage of tailwinds in any particular year. For instance, bonds have a low correlation with stocks and can cushion against losses during market downturns.
If your mirror could talk, it would tell you there’s no one asset class to rule them all—but a mix of asset classes may be your best chance at success.
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