Despite their reputation as spendthrifts, today’s young adults are quite frugal | Canada Voices

The notion that young adults can’t afford a home because they spend too much money on luxuries such as lattes is backward. Instead, rising housing costs are the main reason why they’re spending less on most consumer goods.

Despite their reputation as spendthrifts, today’s young are quite frugal. Older generations have in fact logged the largest rises in spending in recent years, according to Statistics Canada’s Survey of Household Spending.

Between 2010 and 2023, the first and last years for which data are available, households under 40 experienced the slowest growth in overall consumer spending, barely keeping pace with inflation.

An increasing proportion of that spending was allocated to housing. During the period, overall inflation was 35 per cent, but households under the age of 30 saw their shelter-related expenses rise by 75 per cent – more than twice as fast – while those in their 30s saw them rise by 58 per cent.

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In 2010, a household in their 20s would allocate 28 per cent of their budget to housing, but in 2023 this ratio had increased to 35 per cent. And unlike older age groups, households in their 20s and 30s spent less on non-housing expenses in 2023, after inflation, than in 2010.

Most of the decline in after-inflation spending was in two categories. The first was fashion and accessories, owing to the rise of inexpensive fast fashion and increased thrifting. The other was transportation, thanks to a reduction in car ownership, offset by an increase in public transport and ride-hailing services and a postpandemic rise in working from home.

There is some truth to the idea that young people spend money on lattes. The younger the household, the more they spend on restaurant snacks and beverages. However, the annual $433 expenditure by households in their 20s represents less than 1 per cent of their spending, with this proportion falling between 2010 and 2023.

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Young people have always spent money on small luxuries and habits, however, younger people have chosen healthier, less expensive options. For example, in 1999, 30 per cent of adults between the ages of 20 and 24 were regular smokers; by 2022, this had fallen to less than 8 per cent, though some of this was offset by a rise in vaping.

Alcohol consumption among young people has also fallen substantially since the late 1970s, particularly for men. Between 2015 and 2024, the percentage of men between the ages of 18 and 34 who abstain from alcohol nearly doubled to 24 per cent in 2024 from 12 per cent in 2015. This has been offset somewhat by increases in cannabis consumption.

Over all, households in their 20s spent approximately $1,700 on alcohol, tobacco and cannabis in 2023 – the lowest amount of any age group except seniors – which represented 2 per cent of their income.

Shifts have occurred in other categories. Youth travel more than in past generations. However, the cost of flights in real terms have fallen over the decades, and as young people are far less likely to own cars than in the past, that lack of monthly car payments more than offsets the cost of an occasional flight.

It is also true that younger generations attend more expensive concerts than in the past and subscribe to streaming services that were unavailable to previous generations. However, they also go to the movies less often, are far less likely to pay for cable television, and pay for less prerecorded music.

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Those of us in Generation X can remember routinely paying $15 or $20 for a CD in the early 1990s ($30-$40 in today’s dollars), an expense that today’s young don’t face.

This reduction in overall consumer spending is not unique to Canada. In 2018, the U.S. Federal Reserve released a study titled “Are Millennials Different?,” which found that lower levels of spending by millennials than past younger generations were not caused by an increased preference for saving, but rather that they simply had less disposable income.

This decline in young consumers’ spending in North America has not gone unnoticed by financial institutions and retailers. It has created a cottage industry among marketing experts to figure out how to get this generation to open their wallets.

In a grim irony, this lack of non-housing spending by young people acts as a headwind to sectors such as retail, entertainment and hospitality, which have traditionally been sources of employment for the young.

Mike Moffatt is the founding director of the Missing Middle Initiative and co-host of the Missing Middle podcast.