Millennials Will Have the Largest Spending Power Ever
This group age 18 to 38 are transitioning from a self-image of youth, poverty, and non-independence to one of wealth, independence, leadership, and being enabled to take command. In ten years, they may not even recognize themselves.
While low income people do save religiously throughout rough economic years, they tend to start spending once their income rises. It won’t come as a surprise that when the Millennials come into big money, that what they think about, value and spend on, will change too.
While many will still have to skimp, use Uber, and manage finances, others will be spending up a storm for everything from clothes and vacations, to cars and investment property. As impoverished students, they didn’t concern themselves with big ticket items.
Let the Spending Begin
In the next 10 years, they’ll be focused on major purchases including cars and homes.
They spend $200 Billion annually now and according to UBS, Millennials will be worth as much as $31 trillion collectively by 2020 worldwide.
While they are worried about finances, student loans, and saving now, the coming change in their financial status and employment situation might mean they’re worrying for no reason. The future actually looks very good for them, and perhaps us too, if they manage our economy responsibly.
US Millennial’s are coming into their prime spending years. Their total spend is already nearing $200 Billion per year. And for the next 20 years, these numbers will balloon. They will shape consumer spending and business spending and investment for decades.
Their need for housing and ability to invest and purchase could result in major changes in how land will be used. While development is constrained in most cities, particularly Los Angeles and San Francisco, they could change those constraints resulting in a prolonged housing construction boom.
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What Do They Think About and Spend On?
A report from USNews from 2012, tells us education and vacation are top of mind. After graduation, will their focus turn to money, housing, and cars?
And the wealth they’ll control in future is astounding. The question is, will this wealth and power change their values and perspectives? Will money corrupt them and what practices and governance is in place to keep them on the road to good?
- be the wealthiest generation ever
- have immense political and economic power
- be able to create immense good for the world
- compete head to head with the world for resources, jobs and wealth
- be buying homes more than renting
- be free to make terrible mistakes
Worldwide, They’ll Control $31 trillion by 2020
According to UBS, Millennials will be worth as much as $31 trillion collectively by 2020 worldwide. They state that Millennials will start businesses 8 years earlier than their parents and target gross profit margins more than 30% higher.
If they do form families, buy homes and cars, earn bigger pay, and spend, spend, spend, you can see how it could generate a revolution much bigger than the babyboom. Some of them will inherit babyboomer’s money, and babyboomers didn’t inherit huge wealth. Worldwide, 460 billionaires will hand over $US 2.1 trillion over the next two decades to this generation.
Baby boomers are expected to pass down about $US30 trillion to Millennials between 2011 and 2050 in North America alone.
“The millennial generation looks set to benefit from one of the largest intergenerational wealth transfers ever, carried out over a comparatively short timeframe,” writes the UBS team, lead by Mark Haefele, the bank’s global chief investment officer.
Although Millennials are characterized by a supposed obsession with equality, environmental protection and social good, the acquisition of such wealth could change their values and purpose.
UBS argues that Millennials will pursue and promote positive values.
“We would argue that the millennials’ lead in promoting a more sustainable and equal world is likely to spread across cohorts, demanding coordinated efforts from more stakeholders to marshal capital into projects with positive social and environmental returns,” the report says.
Big Lifestyle Changes Fast
Although most Millennials currently can’t afford a house or condo currently, they do want to own one. Even without huge inheritance, the booming US economy alone will present them will a very wealthy lifestyle. Their aggregate annual income is expected to surpass 4 trillion dollars by 2030. What will be spending all that money on in the next 12 years?
Millennial spending habits alone will have major impact on retail and investment markets. Here’s some stats on their retail spending according to a report by buxtonco:
- 58% of Millennials say they “love to shop” compared to 40% of adults overall
- 81% of Millennials’ retail spending occurs in brick and mortar stores
- they spend an average of $75 per online visit and an average of $57 per in-store visit
- they comprise 58% of mobile shoppers and are 2.5 times more likely than the average shopper to be influenced by a mobile app
The 20 years age spand in this group means spending habits of the older ‘senior’ millennials is different than younger ones. Older Millennials favor saving while younger are inclined to spend.
The Millennials purchase journey is primarily online, and that would extend from research to buying clothes to renting an apartment. They’re sensitive to price and use coupons now, but will this be so in the coming decade?
Strangely, they like real experiences and it seems they prefer to buy in brick and mortar stores. One has to wonder why this Internet/smartphone era generation would want to go through the bother of brick and mortar retail stores when the selection and price are worse than online?
Millennials and the Housing Market
With this vast transfer of wealth, they will become the major investors in the US housing market and multifamily rental market.
Their need for homes and trading up could drive construction and real estate transactions for a decade or more.
And home prices? With this many buyers and this much wealth chasing a perennially constrained housing market, from apartments, to condos to 4 bedroom monster homes, we should see big price increases and high inflation in the coming years.
Will Millennials Invest in Real Estate?
They already are investing and buying and selling. The general consensus is they’re not fully interested in real estate. They’ve never had the funds to consider it before, and they’ve been known for their concern for renting and saving for the future.
With their new found wealth, it shouldn’t be much of a surprise that their attention will move to property investing. The opportunities will surely be brought to their attention.
How do you feel about what Millennials will spend on? Will they buy the very same things Gen Xers and Babyboomers did? Is all the hype about social conscience, equality, fairness, and environmental consciousness about to vaporize?
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