How COVID-19 has Changed Millennial Spending HabitsDecember 1, 2020
The coronavirus pandemic has caused major changes to the U.S. economy, forcing tens of millions of workers to file for unemployment and closing nearly 100,000 businesses for good. It’s also changed millennial spending habits as people have spent more time at home this year.
While it’s hard to say how many of these millennial spending trends will be permanent, many have adapted their budgets to the times and spent less overall.
How Millennial Spending Trends Have Changed
Millennial spending habits have been different than older generations. They tend to spend more on comforts and conveniences, such as high-end restaurants, expensive coffee and additional clothing beyond what’s necessary.
But since the coronavirus pandemic began, along with economic uncertainty, millennials have cut back and focused more on essential expenses. Here are some millennial spending statistics by B2B ratings and review platform Clutch:
- Sixty percent of millennials have cut their spending as a result of the pandemic.
- Their top expenses include groceries (40%), alcohol (13%), restaurants (8%), and health and beauty (3%).
- Four in 10 millennials stopped making travel plans for the year, and 20% canceled trips they had scheduled.
- Half of millennials are spending at restaurants through takeout and delivery one to two days a week rather than eating in-house.
- Thirty percent of millennials are spending more online than previously to avoid shopping in person.
One key point is that while most millennials have cut their spending, they’ve increased necessary expenses like groceries, potentially because the pandemic affords people more time to cook. All of these adjustments have been an attempt to adapt to the changing economic landscape brought on by COVID-19.
Are the Changes a Good Thing?
While expenses have increased in certain areas, it appears that the pandemic has had a positive impact on many millennials’ finances, barring job losses, or slashed hours.
According to a survey by the personal finance website Money Under 30, 65% of millennials have claimed that lockdowns and social distancing have had a positive effect on their spending habits. Also, 78% of millennials who work from home have said they’ve spent less time away from their residences, blocking potential opportunities to spend more.
In addition to spending less, millennials are also gaining interest in investing. According to the survey, 70% of respondents under 30, including the youngest cohort of millennials, are interested in learning how to invest compared with 55% of people over 30. Additionally, 20% of millennials are planning to start investing specifically due to the pandemic.
On the flip side, 68% of millennials have experienced changes to their job because of the pandemic, with roughly a third of those dealing with reduced hours or salary, furloughs, or job loss.
Unfortunately, some of the benefits provided for in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including enhanced unemployment benefits and the one-time stimulus payment, have already run out with no refresh currently in sight.
How Will Millennial Spending Trends Change After COVID-19?
It’s unclear whether the changes to millennial spending habits will change after the pandemic ends. This is partially because it’s unclear when that will actually occur. Successful vaccines have been announced and are in the process of being approved for distribution.
Consulting firm McKinsey & Company has projected that the pandemic will most likely end in the third or fourth quarter of 2021, at which point we’ll reach herd immunity through vaccines. But there remains a possibility that the end will come later, especially with potential issues with vaccines, such as a lack of confidence or undesirable side effects.
In general, though, it’s likely that millennials, along with other generations, will be eager to eat out at restaurants and bars again. What’s more, the travel industry, another area where millennials have cut back significantly, has already begun its recovery. According to another report by McKinsey & Company, the industry will see as high as 85% of 2019 volumes in 2021 and a full recovery by 2023.
With a massive shift toward online shopping — for example, Black Friday online shopping increased 21.6% from 2019 — it’s possible that the convenience of shopping from home will remain a millennial spending trend after COVID-19.
The Bottom Line
During the coronavirus pandemic, millennial spending habits have changed to adapt to economic constraints and recommendations by health experts. On the whole, the pandemic has had a positive effect on millennial finances, but many have struggled due to its negative impact on their jobs.
As the world moves toward an end to the pandemic, some spending habits will return, including eating out and traveling. However, others, including spending more online versus in-store, may become longer-term.