Are Millennials Blowing Their Money on Luxuries?

Millennials, despite the fact that many are strapped for cash, are still prioritizing luxury goods, at least according to a report released in February by American Express Business Insights. According to the report, in 2011, Millennial consumers increased their spending on premium luxury fashion by 33%, outpacing every other demographic. This means that although Millennials aren’t the demographic responsible for most luxury purchases — that particular honor is reserved for Boomers — they are buying more and more luxury goods every year.

This doesn’t mean, however, that all Millennials are upping their spending on luxury items. Given their financial situation, many simply can’t afford to. A new study from the Economic Policy Institute reveals 2000 and 2011, the wages of young college graduates dropped 5.4%. And most of this wage loss cut into women’s paychecks: EPI reports that over the 11year period, wages fell 1.6% for men and 8.5% for women. Today, average hourly wages for young female graduates are 13.9% less than the average hourly wages for young male graduates.

Add to stagnant (or falling) wages the mountain of student debt that many young graduates are carrying, and it’s hard to imagine that large numbers of Millennials are being profligate with their earnings. Instead, it’s more likely that the American Express study is capturing the behavior of a small subsection of Millennials who are, indeed, upping their luxury purchases. Many of these Millennials likely have support from their parents (anyone who has seen the new HBO show “Girls” is aware of this Millennial stereotype), and others may be racking up credit card debt. After all, this study was conducted only among Millennials who have American Express cards. And still others could be, as the American Express study authors acknowledge, “affluent young professionals willing to splurge on discretionary items without thinking about the long-term consequences.”

There’s no question that Millennials need better financial education. Take this new study from Iowa State University, which found that 40% of ISU students underestimated their student loan burden, while one in eight didn’t even realize they had debt, but blaming Millennials for luxury spending for which, in all likelihood, only a small minority is responsible seems a bit extreme.

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Photo Credit: Andres Ruedar

9 comments

Veronica Rundell
Veronica Rundell3 years ago

Bill R--As for the not-spending of stimulus funds there are many issues at play there. Some cash strapped locales used the money immediately, others held it for known projects that could wait. For example, I saw ARRA road building/repair projects in my neighborhood immediately. However, I recently saw new projects funded from that same pool.

Also, not every task could be accomplished simulataneously. I live near Chicago--we have millions of miles of roadways. Four interstate projects were begun immediately, and uncountable surface roads were repaired. The traffic was astounding. Still ARRA funds are being spent to resurface two remaining interstates and in pre-winter prep of arterial surface roads. This has kept many people employed for 2+ years. Had it all been spent at once, there would have been 9 months of employment, at best.

Stanley Rampersad
stan Balgobin3 years ago

The working poor are spending their money on refried beans and noodles, a luxury food would be antibiotic, hormonal. steroidal cheap eggs, and white bleached hydroxide bread.

Bill Reese
Bill Reese3 years ago

Lets hope they are spending it on anything and everything, to create more employment. Our failed stimulus sure did not create jobs as promised. Half of it was not even spent for over 1.5 years.

Sandy Erickson
Sandy Erickson3 years ago

What are luxury goods?

Rosie Lopez
Rosie Lopez3 years ago

ty

Green Bee
Fiona Ogilvie3 years ago

Just too many people of this generation in different circumstances to form an opinion.