As someone who has worked with online marketing for years, it’s important for me to understand the spending habits of my audience so that I can launch an effective marketing campaign. As an entrepreneur and investor, it can steer in the right direction on which type of business I should launch or fund next.
One of the most important factors has always been the age group of my potential customers. If I know that they’re Millennials, then I’m going to build a campaign that is more personalized and interactive in order to reach and connect with them.
As I’ve now shifted into the world of Fintech, the importance of spending habits has a slightly different purpose.
If I’m aware of your spending habits, I’m not only able to create a more effective campaign, my team and I are able to help guide, help or even correct some of your spending habits by offering advice, products, and services that have been designed just for you and your demographic.
After conducting research, along with our experiences, here’s how we know how old you are based on your spending:
Greatest and Silent Generations
For anyone born prior to 1945, they are a part of these two generations – the Greatest Generation is composed of people born in 1928 or earlier, while the Silent Generation is 1928 to 1945. Since it’s common for people to spend less as they get older, they don’t commute to work, go out as much, or downsize their homes, it shouldn’t be surprising that these generations spend less than any other age group. In fact, the Greatest Generation only spends around $30,000 per year, while the Silent Generation spends approximately $43,000 annually, according to the U.S. Department of Labor.
Like every demographic, home expenditures are the largest spending category for this demographic. However, as noted in the Motley Fool, health care expenses account for more than 20% of the households’ entire budgets as they approach age 90.
Baby Boomers
Like the generation before them, Baby Boomers (1946-1964) are about to approach their peak spending age. Their largest expense is housing, which is over $18,000 annually, followed by transportation, food, and insurance.
They cite their biggest money wasters as:
- Eating out
- Cable
- Uneaten/expired food
- Credit card interest
- Grocery items
- Cell phone bill
- Cigarettes
- Bottle water
- Convenince packing
- Alcohol
It’s also been found that households with at least one family member between the ages 50 and 64 will spend 8% of their total budget on health items. Overall, Baby Boomers spend close to $60,000 a year.
When it comes to saving money, four in five Boomers claim that they’re more of a saver than a spender, with 45% maxing out their 401(k).
Generation X
Often dubbed the “forgotten generation,” Gen Xers were born roughly between 1965 to 1980. Out of all the generations, they spend the most on housing, just under $22,000 annually. Like Boomers, housing costs are followed by transportation, food, and insurance. Their top money wasters are:
- Eating out
- Uneaten/expired food
- Grocery items
- Cable
- Credit card interest
- Alcohol
- Hobbies & Activities
- Streaming Services
- Cell phone bill
- Cigarettes
Gen Xers spend the most annually out of any other generation, around $67,000, 75% reported that they are also more savers than spenders, and 38% are maxing out their 401(k) contributions.
Millennials
Millennials (1981-1996), who have surpassed Baby Boomers as the largest generation, are an extremely unique demographic. As mentioned in a report released by Morgan Stanley, “Millennials have grown up in the shadow of the Great Recession, are saddled with higher education debt and housing costs, and are forming households later.”
These factors have influenced how this generation spends their money and has made them more frugal. For instance, the number of non-married people under 35 sharing a home or apartment has grown. Because of this, they spend just over $16,000 a year for housing, followed by transportation, food, and insurance. Overall, this group’s total annual spending is around $47,000.
Millennials are cutting back on discretionary expenses, like electronics and car payments, and scaling back on purchases like eating out.
But, Millennials can still waste money and are guilty of wasting their money on:
- Eating out
- Uneaten/expired food
- Alcohol
- Entertainment
- Grocery items
- Hobbies & Activities
- Streaming Services
- Credit Card Interest
- Car/Gas
- Cell phone bill
When it comes to saving and retirement, Millennials are lagging behind previous generations. According to a GoBankingRates survey, 72% of Millennials between 18 and 24 years old have less than $1,000 in their savings accounts and 31% have $0. 67% of those between 25 and 34 have less than $1,000 in their savings accounts, 33% have nothing at all, and 15% have over $10,000.
Morgan Stanley does note that as the first Millennials turn 35, they’ll start entering the peak spending age. In fact, “their aggregate spending is expected to increase 25%, driving demand for new homes and financial security.” Instead of paying for college loans, they’ll start purchasing home loans and life insurance.
Generation Z
While there’s a lot of focus on Millennials, we’re also interested in Generation Z. This generation is on the heels of Millennials, they were roughly born in the late 90s until now, and are considered a “demographic tsunami.”
While it’s still too early to predict all of Generation Z’s spending habits, you can be certain they’re going to be savvy and gadget crazy. Like Millennials, Generation Z is frugal in that they look for the best deals and want the most value for their money. They enjoy do-it-yourself crafts and have an entrepreneurial spirit where they can make and save money at the same time.
Conclusion
The U.S. population is growing. In fact, as Morgan Stanley notes, “As Millennials enter their peak consumption years and Baby Boomers live longer, the two groups will provide a double barreled boost to consumption, bringing with them increased U.S. GDP.”
This means that there’s going to be a shift in spending habits where Health Care, Housing, and Entertainment will become more prominent, while Education, Apparel, and Transportation will begin to underperform.
However, if you want to stay ahead of the curve, you should start paying attention to Generation Z as well. They’re going to be a huge consumer base in a just a couple of years — which we are thinking will happen in a few less years than we had supposed before.
