Bah, Humbug! Why Are Millennials So Cheap?

Consumer spending is up, but I highly doubt Millennials are driving the trend. Many people are surprised when I describe Millenials as ‘frugal’, but the Gen Y’ers I know agree wholeheartedly.

As a generation, these children of the free-spending Boomers are tightwads who love a bargain.

There are probably many reasons for their collective thriftiness. Here’s a possible list of reasons why Millennials are such pennypinchers.

1. They hate waste. Efficiency is a core Millennial, value – they don’t like to waste time, money or any other resource.

2. Indecisiveness. Millennials often prefer to make no decision than the wrong decision. I think it has to do with fear of closing doors on possible opportunities more than indecisiveness, per se.

3. Cash-strapped. Many are students, unemployed, or underemployed; Increasingly, they are up to their eyeballs in college loan debt. Penny pinching is a rational response.

4. Fear of being cash strapped. Even those who are employed aren’t sure when they might need a rainy day fund.

5. Self-perceptions: Even if they aren’t cash strapped, they like to think of themselves as smart shoppers.

6. Debt averse: They don’t want to borrow any more unless they absolutely have to – including a car, a house, an education.

7. Eye on the future: Many want to use money to make money. They have a long term view.

8. Non-materialistic: This usually gets an incredulous laugh. But it’s true that they value experiences over things. They aspire to travel light in the world.

9. Saving is a game: It can be fun to see how far you can stretch a dime or a dollar.

10. Saving yields social currency: Knowing about how to get the best deals makes you a valuable resource to others.

How can marketers get Gen Y to open their wallets, purses, and smart cards?

1. Have a heart. Link the purchase to something they care about, such as a worthy cause, a passion or interest. Starbucks Project Red is a good example.

2. Offer deals not discounts. Is there a difference. You bet. To a Millennial, a deal is something you have to work for. You earn it or its exclusive. Anybody can have a discount, but a deal is special. This insider-ness is behind the appeal of QR codes, Groupon, and Foursquare offers.

3. Demonstrate why it’s smarter in the long run. Deals and incentives that expire, long-term benefits and savings over time are all time tested ways to incent a purchase now.

http://twitter.com/paulalexgray Paul Alex Gray

Interesting post and yes I agree from research and observation that millenials are more inclined to think a bit more about purchases. Some interesting points you raised were around putting off decisions as well as the social elements – seeing who can get the biggest discount or saving is a fun way that millenials learning about value for money.

I don’t fully agree though. If you compare a millenial to a Gen-Xer at the same age there are so many more things that are seen as essentials these days. Who could live without a mobile phone? Hardly anyone in this category – and phones are often upgraded once a year on expensive contracts. All that texting, internet browsing and calling chews up a lot of money that Gen Xers never really had to spend. Research from the Kaiser Family Foundation (http://www.kff.org/entmedia/upload/8010.pdf) shows that device ownership amongst younger people has never been higher – in addition to phones, young people are buying gaming devices, netbooks, MP3 players, tablet PCs and more. The social kudos of owning devices is a strong driver for Millenials to have these and I would suspect that a lof of them spend a fair amount of money each year on devices that are something that other generations would regard as more of a luxury.

I’d be surprised if Millenials had such a resistance to debt. I’ve seen research elsewhere and even on this very blog pointing out that use of credit cards to fund living expenses is quite common and this is hardly a wise or sustainable financial position (http://millennialmarketing.com/2009/06/gen-y-young-and-poor-in-america/).

Perhaps the “live for the moment” attitude of youth is more common across generations than we may think and that it’s only the natural lessons that come with age that teach (most) people to start thinking more frugally.
http://twitter.com/kapilpoojari Kapil Poojari

Carol,

I agree with the 10 reasons you have highlighted, but I also agree with Paul’s comment with regard to the essentials.

Millennials play a important part as a segment in consumerism. There are segments like Telecom, Internet, Gadgets, Clothing among others where the Millennials spend substantial amount of money. Having said this I do agree to your point that these spendings might have incurred from their earnings or debt. Millennials would purchase anything and everything that engages and spice up their every day life but at the same time they are conscious of Health, Fashion, Sustainability etc.

The consumer has evolved from being the shopper to a Smart shopper, again referring to the reasons you have mentioned the The baby boomers or earlier generations would purchase things selectively which has a value add on a long term basis hence their frequency of spending is limited compared to Millennial.

Kapil
http://twitter.com/offcampusmedia Off Campus Media

Great post and good feedback! One other element to consider is the fact that “Gen Y” and “millennials” are a very fragmented group to say the least. Depending on the socioeconomic and cultural background, you could find millennials that are over spenders and very materialistic. Truly, there is a spectrum of consumerism amongst millennials (and other groups) and there are plenty of college students (for example) that have high levels of discretionary spending power vs. those that have very little. Unlike many other demographics, these differences are more pronounced and distinct amongst college students – just compare super high-end campus populations with lower-end ones. Anyways, just my humble opinion.
http://www.superiorpromos.com Eddie

I think debt is a huge reason. I was listening to some of my family members talk about tuition costs and how much the kids are in the hole. Couple the debt issue with the lack of opportunity and you have light spenders.
http://www.superiorpromos.com Eddie

I think debt is a huge reason. I was listening to some of my family members talk about tuition costs and how much the kids are in the hole. Couple the debt issue with the lack of opportunity and you have light spenders.
David

Some define Generation Y as spanning the years 1977 – 95. Just a short while ago, I would have agreed with them because:

1. A chart on the web proves that the annual birthrate REALLY started to dramatically increase in ’77. The chart showed about 3.3 million babies born that year and 3.14m in ’76 (a difference of 160,000).
2. Those born between ’77 and ’95 either just entered this world or just came of age when the web first became available to the public in ’95 (hence the “Net Generation,” or Millenials).
3. Studies have shown that those born in the late ’70s have very similar attitudes to those born in the ’80s (the former also voted 66 – 32 for Obama).

Now, however, I do not believe in using dates to define the Millenial Generation. Anyone can be Gen Y if he or she is tech – savvy, open – minded to diversity of all kinds, and likes the latest in pop culture. I was born in 1979 and all these characteristics describe me, so that makes me a Millenial. I feel this way because there are just some people who do not fit into the generation to which they were assigned. I say, “live and let live,” and allow everyone to choose whichever generation they want to belong to – one that best matches their characteristics.
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