Hold the avocado toast? Millennials spend more on rent, less on entertainment, than others, research shows

Hold the avocado toast? Millennials spend more on rent, less on entertainment, than others, research shows
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The millennial generation gets a bad rap. Tired cliches dragged out by older Americans paint the newest entrants into the workforce as needy video gamers who consume vast amounts of avocado toast.

But new federal data shows the millennial generation is spending more of its money on healthy foods and education, relative to older generations. At the same time, millennials are far more likely to be saddled with high rent payments that sap their ability to spend on luxury items.

That’s in part because millennials — many of whom are just a few years into their careers — have less money to spend and fewer assets to their names. 

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It's also the case that millennials, who entered the workforce just before and during the Great Recession, have less money and fewer assets now than older generations did at the same age, said Cheryl Russell, a demographer and editorial director at New Strategist Press.

Members of the millennial generation spent an average of $47,112 per year, according to the research from the Bureau of Labor Statistics (BLS). That’s about $8,900 less than the median American — and almost $20,000 less than members of Generation X, who are in their prime earning years. Baby boomers, who are nearing retirement, spend almost $60,000 a year.

"Millions of millennials are financially strapped, and their spending reflects their struggle," Russell said. "Despite the fact that millennials are better educated, their earnings are lower than the earnings of boomers and Gen Xers at the same age and they are less likely to have a job with health insurance or retirement benefits."

Because millennials are far less likely to own their own homes, they spend much more on rent than almost every other American. Millennials dedicate about 13 percent of their total incomes to rent. They also spend a higher amount in terms of real dollars on housing than any other generation — an average of $6,240 per year.

By comparison, Gen Xers spend just 6.5 percent of their incomes on rent, and boomers send only 4 percent of their expenditures to landlords.

Millennials spend far less on homes they own than do older generations, because so many more members of older generations own their homes and are less likely to pay rent.

The only generation that spends more on rent than millennials is the G.I. generation, those born before 1928, likely because much of that money goes to nursing homes and assisted living facilities.

"Millennials work entry-level jobs and, with many of their parents still recovering from the fiscal crisis and unable to assist and with health care, education and daily expenses increasing despite some small raises and bonuses, many are focusing on the basics, such as their rent," said Karen McGrath, a communications expert at the College of St. Rose and the co-author of "The Millennial Mindset: Unraveling Fact from Fiction.”

All three generations that make up the bulk of the workforce spend relatively even shares of their yearly expenditures, about 1 percent, on alcoholic beverages. 

All three spend more than $1,000 a year on cellphones, but millennials spend far less — just $110 per year — on residential phone services like land lines. That’s a little more than a third of what Generation X spends on land lines, and about a quarter of what boomers spend.

Where millennials do spend more than older generations, as a share of their total expenditures, is on food away from home. Millennials spend about 6 percent of their income, slightly higher than Gen Xers and more than a full percentage point higher than boomers, on takeout, restaurant meals and cafes.

But in real dollar terms, millennials still spend less — $2,890 — than the average member of Generation X, at $3,864, or baby boomers, at $2,900, do on meals outside the home.

When it comes to what they eat at home, millennials spend less on beef, and more on poultry, than older generations. Millennials spend more on eggs than boomers or Generation X.

Geoffrey Paulin, the BLS economist behind the research, said the higher egg consumption among the youngest generation may reflect a decision by the American Heart Association (AHA) back in 2000, when the group reversed a recommendation made in the 1970s that people reduce their egg consumption to cut down on cholesterol.

“The baby boomers and Generation X, who would have been young adults either when the 1970s or when it was reversed in 2000, allocate the smallest portion of the meat budget to eggs, while millennials, the oldest of whom were young adults when the AHA changed recommendations, allocate a larger portion to eggs,” Paulin speculated.

Millennials tend to spend higher shares on their food budget on fresh vegetables, but a lower share on fresh fruit than previous generations, Paulin found. And they spend less than any other generation on sugar and other sweet foods, as well as on fats and oils.

Despite the caricature of couch-bound millennials wasting their lives on video games, millennials actually spend a lower share of their total expenditures on entertainment than Generation X, baby boomers or the silent generation. In terms of real dollars, millennials spend an average of about $2,186, 4.6 percent of their total, on entertainment. That’s more than $1,000 less per year than Generation X or the boomers, and almost $100 less than the silent generation.

"Rather than spending like the infamous yuppies of the baby-boom generation, millennial spending is more like that of lower-income households. They are big spenders on rent, coin-operated laundries, fast food," Russell said. "They are also the biggest spenders on student loan interest payments."

Paulin’s research appeared in the March edition of the Monthly Labor Review, the BLS’s research publication.