We are in the midst of an unprecedented transfer of wealth, with trillions of dollars being moved from one generation to the next. This transfer challenges many commonly held ideas as new values and interests become more prominent. In short, the economy is changing, and while some of these new practices might raise an eyebrow or two, not all of these ideas are without merit.
For someone from the boomer generation, it might be easy to become upset with or confused by millennials' differing points of view. However, taking note of the differences between the two generations can foster better communication and understanding.
The younger generations, including millennials, Gen Z, Zoomers, and whatever else you call them, have a different perspective on wealth than their forebears. As these generations reach middle age, an interesting trend has emerged in emphasizing YOLO (You Only Live Once). Now that these generations have the steering wheel, they seem to be stepping on the gas and running full force into exciting, once-in-a-lifetime experiences.
At this point, it bears looking at the “why” of the YOLO economy. In other words, why do these forty-somethings spend as if there is no tomorrow?
Less money: Your average 40-year-old earns about $49,000 a year. ($61,000 in California). While this is more than the 40-year-olds of the previous generation, the rising cost of living, especially in the last few years, has taken a significant bite out of that difference.1
Less control: This generation also holds a smaller piece of the pie. While the post-WWII cohort controlled 22 percent of wealth in the United States once it reached middle age, millennials only controlled seven percent.2
Perhaps the biggest factor is less marriage: Middle-aged millennials are less likely to be married or start families than prior generations. Only 44 percent of millennials have walked down the aisle by age 40, compared to 61 percent for Generation X and 53 percent for baby boomers. Only 30 percent of millennials live with a spouse and at least one child, far lower than prior generations. This means that the expenses that come with a family are also off the table.3
The result is a very different economic picture for today’s middle-aged individuals. Consequently, all of these differences have informed a different set of values. Among millennials, 78 percent prefer spending money on experiences rather than material things. While prior generations may have placed more importance on things like home ownership, car purchases, and investments, millennials are looking at a less certain future with disparate priorities. For these reasons, spending on travel, exclusive events, and entertainment has become a priority.4
One of the largest purchases boomers invested in was their home. If you are a millennial in California, you may have no choice but to focus on experiences rather than something like home ownership.
Homeownership rates for Californians ages 25 to 45 have fallen the most of any age group from 1980 to 2020, per the study. The elder half of that group, Californians ages 35 to 45, saw their homeownership rate plunge from 64.4% in 1980 to 39.7% in 2020; the younger cohort, those who are 25 to 35, saw their homeownership rate plunge from 39.4% to 15.5%.
The average age of a US homebuyer in 2021 was 33, according to the National Association of Realtors; in 2023, it was 35. In California, it's at age 49 that over half of residents are homeowners, per the study.5
Of course, many boomers today find themselves in similar situations as middle-aged millennials. Most of the boomer generation is in their retirement, with their children grown and perhaps finding themselves needing further stimulation in their golden years. While many keep working part-time, start businesses, or help their families with childcare, there may be a pang of that YOLO spirit in them as well, and a similar yearning for adventure.
And for good reason. While their middle-age experiences may have been very different, there is no better time than now to take that big trip you’ve always thought about. Maybe it’s time to splurge on those expensive concert tickets or challenge yourself through a special adventure that always seemed impractical.
You may not have a craving for adventure, but it’s important to remember that wealth can serve us in two ways: providing security and allowing us to enjoy life. Many of you have been working hard with me to pursue that security, and we have also made time to talk about your need for enjoyment as well.
It’s also possible that the younger people in your family have done too much YOLO and not enough saving and investing. A conversation with me may help them understand how to balance living for today and preparing for tomorrow. I have done extensive “family financial planning” with my clients and their family members, helping them bridge the gap between saving and investing while still enjoying life! Please feel free to reach out to me by phone, or schedule some time on my calendar here:
https://go.oncehub.com/TerryAllen
1. Businessinsider.com, February 22, 2023
2. Fortune.com, March 22, 2023
3. Pewresearch.org, October 19, 2023
4. Harris Interactive, October 19, 2023
5. Business Insider January 4, 2024
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