Adults in their 20s and 30s are set to become the largest living adult demographic in the U.S. They’re already the largest generation in the workforce, they’ll soon be the most populous voting demographic and they also have control over more than an estimated $1 trillion in direct annual spending (about $430 billion of which is attributed to discretionary purposes, showing there’s a lot of buying power for brands to compete).
Aside from being notably large and powerful, this group is also treating financial matters differently than previous generations. Whether you’re a part of this generation of not, how this group makes decisions can have a large impact on the economy, and it’s important to understand how their purchase habits may differ from previous generations. Here are some key differences between young adults’ money habits and those of their parents and grandparents:
Delaying major life events
Today’s young adults are getting married, buying homes and having children later in life than their parents did. There are countless potential reasons for these trends, but a few common factors include housing prices and high debt levels. About three-quarters of adults between 18 and 34 years old have some sort of debt, the most common forms being credit card and student loans. The majority of respondents said debt has led them to delay life events.
Housing prices have also increased dramatically over the years. The median home price in Portland in September 2019 was $416k, according to Zillow. One decade before, the median home price was $281,000.
The average price of a home is increasing for many reasons, but one factor is home builder strategy. It’s much more lucrative to build a larger, more expensive home than a smaller, more affordable one. People are responding by waiting until they can purchase a long-term home, rather than the starter homes that older generations invested in during their young adult years. This will have a lasting impact on how these adults build personal wealth, as well as, how long they could have a mortgage payment.
The delay in major purchases or life events by this generation doesn’t mean they won’t eventually get married or have kids; they would just rather wait until they can afford to do so more easily.
Choosing brands thoughtfully
Young adults aren’t as brand-loyal as past generations, and they’re more selective about which companies they support. This applies to their favorite clothing brands, go-to grocery stores and more.
Though young adults are willing to switch brands as they please, they’re generally steadfast in their priorities. They’re all about environmental and social consciousness. Close to half of Americans say they want to be seen as someone who buys eco-friendly products. Additionally, 90 percent of people in their 20s and 30s said they’d buy from brands whose social and environmental policies they trust.
Personalized attention also plays a prominent role. Brand loyalty increases 28 percent on average when companies deliver personalized marketing communications. Further, 70 percent of younger consumers get frustrated by irrelevant emails.
Adults today also strive to be frugal. Nearly one-third classify themselves as bargain shoppers, and 40 percent of 18- to 24-year-olds shopped at secondhand stores in 2017. Frugality isn’t always about a dollar saved, though. It’s also about securing long-term value and being efficient with money.
Young adults don’t always seek out ownership so much as they do access—which can explain the popularity of such services as Uber and Lyft, Rent the Runway (a clothing and accessory rental service), Airbnb and others.
What can brands learn from these trends?
To earn modern shoppers’ trust, it’s important to:
- Identify consumers’ needs and work to meet them.
- Do good for the environment and your community.
- Help them save money when they can.
Getting hands-on with money
Previous generations considered financial matters to be subjects best kept private. Adults today; however, have no problem talking about money. In many cases, being open about financial matters is the best way to identify obstacles and solutions, and to strategically budget.
The Employee Benefit Research Institute found that people born between 1977 and 2000 were much more likely to:
- Determine if their health insurance plan covered certain medications
- Ask for a less-expensive alternative for a prescription
- Talk to their doctor about treatment options and costs
- Use online cost tracking tools to manage health care costs
Younger demographics are also willing to discuss their financial habits with their partners. More than half have talked about their individual saving and spending habits with their significant others, and 51 percent have created a household budget with their partners. Being open about money matters can help couples avoid conflict and strengthen their relationships, Journal of Accountancy pointed out.
It’s important to have an idea of your spending and saving habits, and talking about them is a good way to identify your long-term objectives. Are you ready to start a conversation about your financial goals? Reach out to OnPoint and we’ll help you open your checking and savings accounts or take a look at how to make major life events more achievable.