“There’s a huge gap that has opened up between the older generation and the younger generation’s spending,” said David Tinsley, chief economist at Bank of America Institute.
One reason for the split, he said, could be a shift in spending behavior after the pandemic, which has proven to be riskier and more dangerous for older Americans who may have been reluctant to travel so far.
“Some of these throwbacks to broader travel or leisure services may be a kind of relaxation — they’re showing off or accomplishing something they can’t during a pandemic,” he said, adding that there has been a notable rise in cruises among travelers in their 60s, 70s and 80s.
Among younger adults, spending on airlines and hotels fell 5 percent in April compared to a year ago, according to Bank of America credit card data. But for seniors, spending has increased in these categories, as they become more comfortable with adventure.
All in all, baby boomers spent 2 percent more than they did a year ago, while traditionalists spent 5 percent more — although a dip among younger generations helped cut overall spending by 0.2 percent.
Some of that spending growth among older Americans is fueled by larger Social Security payments, which rose 8.7 percent to offset inflation this year.
Just as important, the study authors say, is that older Americans also tend to have lower housing costs. Many of them own their homes outright or have low mortgage rates. Young adults, by comparison, are more likely to rent. They are more likely to move, either for work or family reasons, Tinsley said, which means they are constantly having to renegotiate housing costs.
“Younger generations are moving into a home twice as often as older generations — and every time they move in, they’re faced with higher rents, higher mortgage rates, and possibly even higher house prices,” he said. “The end result is that rising housing costs disproportionately affect younger generations.”
In California, Emerald Colmer, 29, is spending more than a third of her home wages on the one-bedroom apartment she shares with her cat, Franklin.
Culmer earns $75,000 annually at a technology company. But she also has about $92,000 in student loan debt. She dropped out of her master’s program during the pandemic and isn’t sure if she’ll return, in part because she’s worried about getting additional loans. Additionally, she is paying off about $10,000 in credit card debt related to moving costs.
“I’m a millennial and I’m drowning in debt,” she said. “I’m lucky to have a tech job to work from home, which helps tremendously in terms of commuting and gas usage. But everything went up a lot, whether it’s rent or groceries or basic necessities. I had to cut a lot of corners.”
She has canceled all monthly subscriptions and relies on her grandmother for Hulu and Disney Plus. Collmer says she has also benefited from a pandemic-related freeze on student loan payments, though they are due to start again at the end of August.
Resuming student loan payments could widen spending gaps further, dealing another blow to adults ages 25 to 49, who own about 70 percent of the nation’s student loans, according to Education Department data cited by Bank of America.
“Financially, I’m worse off now than I was a few years ago,” Colmer said. “And when these student loans start again, I’m going to sacrifice some more.”
The downturn in the economy, which many analysts are forecasting for this year, could exacerbate the generational divide. If the job market weakens, companies can start laying off more people.
It is “astounding” that even Generation X (those between the ages of 46 and 58), which reflects the spending patterns of baby boomers and other seniors, show the same signs of vulnerability as Millennials and Generation Z (younger than 28), Bank of America researchers note. ), although they did not give any reasons for this shift.
“It is important that Gen X — who are not particularly young — act like Gen X in their spending patterns,” said Tinsley, who identifies with Gen X. “There seems to be a split in behavior between workers and non-workers.”
Paying for his son’s college education, along with rising food and other expenses, has made it hard to shell out extra cash, says Steve Barrera, 56, a software engineer in Morgantown, Pennsylvania. His family of four has cut back on travel, including local excursions and a week’s stay at the beach.
Meanwhile, his father and stepmother—both retired baby boomers with pensions—take two cruises a year and recently vacationed in Iceland.
“We’re making good money. We’re doing well financially, but I probably wouldn’t have the same financial situation that they are.” “It’s getting harder to save. I don’t have a pension and my retirement is very dependent on the financial markets, so there’s always a little bit of a worry.”
Rising prices for food, housing, and other daily costs have made this happen It also made it difficult for many families to maintain their spending habits. Although inflation has eased from a high of 9.1% last summer, prices are still 4% higher than they were a year ago.
However, many Americans save more than they did a few years ago. And according to Bank of America, pandemic-era stimulus funds, combined with declines in spending on travel and other services, have left average household savings and checking balances well above pre-pandemic levels for all generations.
But this does not mean that long-standing discrepancies in wealth are not exacerbating. Baby boomers had nearly $73 trillion in wealth at the end of last year, eight times that of millennials, according to Federal Reserve data. This translates to an average net worth of $1.7 million for baby boomers, compared to $214,000 for millennials.
Kate Brown, a retired midwestern nurse, and her husband are preparing for a two-week vacation. They take a cruise to Alaska, then twirl a train ride and a wildlife photo session.
It’s their first big post-retirement and getting through the pandemic. They’ve largely stayed where they are over the past few years, and the recent inflation-related rise in Social Security payments has made covering the basics a little easier.
But it’s a different story for their two children, both in their twenties, who are just entering the workforce after college and law school. One lives at home, while the other spends a significant portion of her income on rent.
“I see a huge discrepancy from where we were when we were kids,” said Brown, 63. “The cost of education is at its limit. The housing market is horrible. And there are all these other exorbitant expenses that we never have: cable, cell phone bills, internet. These kids are behind.” Eight ball before they even walk out the door.”
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