Are Millennials Ahead of Gen X in Terms of Spending?

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Millennials take a lot of heat for their appetite for avocado toast and iced lattes. If they cut out those things, they’d be able to buy a house! (Per Boomers, anyway.)

But while millennials get a bad rap for throwing their money away, they’re not the biggest spendthrifts among generations. As of 2018, Gen X still led the way in spending by generation.

According to a Smart Asset study analyzing data from the Bureau of Labor Statistics’ 2018 Consumer Expenditure report, Gen Xers have the highest post-tax income and spend the most money. At the time, Gen Xers’ average post-tax income was about $30,000 more than millennials’ post-tax income, with millennials earning $58,628 and Gen Xers earning $88,794.

On average, Gen Xers outspent millennials by 41% per year, with millennials spending $52,784 and Gen Xers spending $74,683.

Top spending categories by generation

Both millennials and Gen Xers—and Baby Boomers for that matter—spend the largest chunks of their money on housing and transportation.

According to the Smart Asset study, millennials spent nearly 22% of their income on housing and almost 18% on transportation, while Gen Xers spent 19% on housing and roughly 16% on transportation. But millennials’ next highest spending category was food at a little more than 13%, while Gen Xers spent the third-most on personal insurance and pensions, with more than 14% of their spending allocated there.

That checks out, as Gen Xers are much closer to retirement age than millennials. And of course, millennials spend a larger percentage on food—all those brunches and avocado toasts.

Both generations struggle in terms of saving money, if you follow the benchmark of stashing away 20% of your post-tax income. Millennials save about 10%, while Gen Xers save about 16%, according to Smart Asset’s findings.

But that’s assuming that whatever’s left after all the spending categories, including “other,” goes toward savings. It doesn’t account for how much debt each generation could be taking on. If a lot of what’s left for you is going toward debt repayment, you’re not alone. About 80% of Americans have some type of debt, according to the Pew Research Center.

Getting out of the debt cycle can be a challenge, but using a payoff calculator can help you figure out much you can reasonably allocate toward repaying your debt, determine how long you’ll take to become debt-free, and see how much you can potentially save in interest.

The ‘Youth Boom’ and the change in retail spending

Gen Xers are at their prime spending age because they’re likely at a peak in their careers. The average annual expenditure, per Morgan Stanley Research, tends to look like an upside-down V, with the high point coming between ages 45-54—which accounts for a good chunk of Gen Xers.

With millennials and Gen Zers—the generation behind them—climbing in their careers, consumption growth is expected to be strong as we head into the next decade.

According to Morgan Stanley Research forecasts, millennials spend a disproportionate amount of their incomes on vehicles, apparel, food-away-from-home (as opposed to food-at-home), and housing when compared with older generations.

Millennials might have different priorities than Gen X, and while they’re not spending as much as Gen Xers are overall just yet, they’re spending more proportionately to their income. As millennials make more money, they'll likely spend more overall and their proportionate spending will probably end up going down, assuming they stay savvy. But the table could turn if they become numb to debt.

Sources:

• Smart Asset/Bureau of Labor Statistics
• Pew Research Center
• Morgan Stanley Research

By Casey Musarra: Casey Musarra is a personal finance writer with over a decade of writing experience and a credit score hovering near 800. She has written several hundred articles on topics ranging from taxes to debt-free living. Previous bylines include newsday.com and philly.com.