Baby boomers subsidize Gen Z and millennial spending habits

Despite the end of COVID-related stimulus and warnings from discount retailers like Dollar Tree and Dollar General on weak demand, other data show more robust spending patterns elsewhere in the economy.

In a Financial Times op-ed last Sunday, the CEO of Meredith Whitney Advisory Group noted that American Express data shows Gen Z and millennials are spending at a rate that’s five times more than the rate for boomers.

“They have the wherewithal to spend on things like French-press coffee, Instagrammable leisure experiences, online gaming and sports betting as well as yes, avocado toast,” she wrote.

Whitney noted that households earning over $100,000 a year saw virtually no change in their after-tax income between 2019 and 2022.

Meanwhile, households earning more than $150,000 have kept their spending relatively constant over the last year even as it shifted from discretionary items to essentials.

“The generation aged between 24 and 38 represents 20% of the US population and has the most discretionary spending power of any other age cohort,” Whitney added. “They have and continue to benefit from a different type of subsidy: their parents.”

Those younger generations are living with their parents at record levels, she said, adding that they enjoy parent-subsidized expenses like cell phone plans.

And given that nearly 20% of men and almost 12% of women aged 24-35 are living at home with their parents, they are also not spending their money on housing-related expenses like insurance, property taxes and utilities, Whitney pointed out.

“As long as these trends continue, this age cohort will remain the key driver of discretionary spending in the US,” she predicted. “It’s no wonder why there is so much debate over the real state of the US economy.”

Whitney’s analysis came days before the Commerce Department’s monthly retail sales report showed a surprise uptick, suggesting consumers are still able and willing to spend more despite years high inflation and borrowing costs. 

She also echoed what “Bond King” Bill Gross said last month, when he posted a similar take on X, though without supporting data.

“Hard to measure but I suspect upper middle class and wealthy boomers are funding millennials and younger generational spending by transferring assets/cash and paying bills, and in the process pumping retail sales and the economy,” he wrote. “In essence they are liquidating balance sheets to pay for spending. This is likely to continue as long as stocks/housing prices stay elevated.”