Millennials are maligned as a generation of self-absorbed tech-addicts. But their distinctive approach to spending and saving is set to reshape companies, markets and economies.

Millennials are often characterised as feckless, selfie-taking narcissists. Their capricious spending habits have reportedly hastened the demise of consumer industries from beer to soap, napkins to motorcycles. It is said they would rather fritter away their cash on smashed-avocado brunch dishes than save for the future.

In real terms, the wages of someone in their 20s now are less than the wages of someone in their 20s 10 or 15 years ago.

Criticism of youngsters is hardly new: “People try to put us down,” as Roger Daltrey complained on The Who’s hit “My Generation” in 1965. But at least Daltrey’s generation – the baby boomers – had a fast-growing economy in which to find their feet. Not so the millennials who entered the jobs market in the shadow of the financial crisis: they are grappling with student debt, rising house prices and stagnant incomes.

“In real terms, the wages of someone in their 20s now are less than the wages of someone in their 20s 10 or 15 years ago,” says former UK cabinet minister and life peer David Willetts, who chairs the Intergenerational Commission at think tank the Resolution Foundation. He argues millennials are in fact “a serious-minded group. They think if they don’t work hard they are facing a very tough and competitive world out there: in many ways they are.”

But there is hope for millennials. More resilient than their cosseted reputation suggests, they are slowly beginning to overcome their challenging economic circumstances to exert an influence on companies, markets and societies, with significant implications for investors in a range of industries.

Millennial myths

So what is a millennial? Coined by the demographers William Strauss and Neil Howe, the term usually refers to a cohort born between 1981 and 2000, which means the oldest are now in their late 30s (the phrase Generation Y refers to the same group). As the most populous generation in the US and in some European countries, millennials have emerged as prime targets for advertisers.

Coined by the demographers William Strauss and Neil Howe, the term usually refers to a cohort born between 1981 and 2000, which means the oldest are now in their late 30s.

But despite a wealth of research on the subject, millennials remain shrouded in myths and half-truths. Polling organisation Ipsos MORI recently published a global survey that lays bare the misperceptions of the millennial generation in society and the workplace.1 It shows much of the received wisdom about millennials is entirely false: they are not impervious to advertisements, as some have supposed; and neither are they footloose job-hoppers. In fact, British millennials are staying with their employers longer than previous generations did at the same age.

So what can we say about millennials? For a start, there’s some truth in the smartphone-wielding stereotype. “Millennials are more comfortable with technology than previous generations, having grown up in the era of high-speed internet,” according to Michael Clemence, research manager at Ipsos and a co-author of the report.

Millennials spend 1457 minutes per week on their phones, more than double the figure for their immediate predecessors, the so-called Generation X. As the best-educated cohort in history, there is also evidence that university life has made millennials more likely to travel, more open to new experiences and more tolerant of difference.

Shadow of the crisis

Some have claimed the technological and educational advantages enjoyed by millennials are actually hindering them. In his book The Vanishing American Adult (2017), US Republican Senator Ben Sasse writes that millennials have “far too few problems”, diagnosing a state of “affluenza”. Sasse argues the younger generation have been infantilised by the passive consumption of media on the internet.

But others make the case that the defining moment for the millennial generation was not the invention of Apple’s iPhone, but another seismic event that began in late 2007: the global financial crisis. Although everyone felt the impact of the crash, millennials’ prospects were hit especially hard because they were poised to enter the labour market just as the recession took hold.

“When previous generations went into jobs, either as young people without a degree or as graduates, the expectation would have been fairly rapid salary progression over the first three or four years, perhaps as much as 10 per cent a year,” says Stewart Robertson, senior economist for the UK and Europe at Aviva Investors. “That wasn’t the case for those who entered the labour market post-crisis, who experienced quite fierce austerity. The squeeze from 2009 to 2014 was probably the worst in the post-war period.”

Post-crisis university graduates found themselves compelled to take jobs for which they were overqualified – a process economists call ‘cyclical downgrading’ – and this slashed their earnings potential over the longer term (high-street graduates fared even worse).2

Millennial men in the UK stand to earn £12,500 less during their 20s than their counterparts in Generation X, as more of them fill part-time and low-skilled roles.3 The effect on wages has been even more pronounced in the US, where a typical graduate in 2009 stood to earn $58,600 less over the following decade than a typical graduate in 2007.4

Generation hex

“The oldest millennials got out of school right when the recession hit, when there weren’t a lot of jobs available, so they had to settle for roles below the skills they earned in college,” says Beth Ann Bovino, US chief economist at ratings agency S&P Global Ratings in New York and author of a study on the millennial generation. “This hurt their wages at that point in time but it also hurt their job opportunities later on in their career.”

In terms of outlook and economic circumstance, American millennials have much in common with the hardy, conservative-minded ‘Silent Generation’ who grew up amid the threat of war and economic recession in the mid-20th century.

Bovino’s research shows that in terms of outlook and economic circumstance, American millennials have much in common with the hardy, conservative-minded ‘Silent Generation’ who grew up amid the threat of war and economic recession in the mid-20th century. Some may balk at the comparison. After all, millennials are able to travel the world for a relative pittance and have access to a civilisation’s worth of art and culture at the touch of a button – luxuries beyond the wildest imaginings of Dustbowl America.

Nonetheless, Bovino insists the similarities are there. “The millennials and the Silent Generation of the 1920s-1940s grew up during the two worst recessions in the history of the US: for millennials it was the Great Recession, and for the Silent Generation it was the Great Depression. They saw their parents suffer during those downturns, and that led to some similarities in behaviour: both groups tend to take conservative spending decisions, for example.”

Around 80 per cent of millennials say the financial crisis taught them to put away money for a rainy day.5 Asked how they would use a tax refund, 39 per cent of millennials said they would save it, compared with 33 per cent of baby boomers and only 23 per cent of Generation Xers.6 These diligent saving habits mean pension coverage among millennials is improving, but their stagnating wages are hurting overall living standards.

Delayed adulthood

In some respects the Silent Generation actually had some advantages over today’s youth. While many millennials have enjoyed the benefits of higher education, it has left them saddled with unprecedented levels of debt. More than $1.2 trillion in student debt is outstanding in the US, of which more than 60 per cent is owed by millennials see figure 1. The class of 2016 graduated with an average debt per head of $37,000 and default rates are rising, causing the Brookings Institution to warn of a ‘looming student loan crisis’.7

Millennials are also struggling to get onto the housing ladder. The problem is particularly acute in the UK, where a house now costs seven times the average income. The Resolution Foundation has discovered British millennials spend three times more of their take-home pay on housing than their grandparents did, and families headed by 30-year-olds are half as likely to own houses as baby boomers of the same age.

graph showing the US student loan balances by age group

Housing was expensive even before the crisis, but quantitative easing policies exacerbated the problem by boosting asset prices, contributing to wealth inequality between generations (see The Pinch). Robertson points out that millennials benefit from low interest rates that offset price rises, making mortgage repayments less onerous than they were in previous decades when housing was ostensibly more affordable. But when you factor in wage stagnation and low inflation, housing remains a big outlay that leaves less available for discretionary spending.

“In the past, interest rates were high partly because inflation was high, and inflation is great for eroding debt,” he says. “When previous generations took on a mortgage it was often a huge burden initially – but with high inflation eroding the value of the debt, and steep wage increases each year, the burden fell away quickly. These days, mortgage repayments are less of a burden at first, but that burden lasts much longer.”

For now, many millennials are choosing to live at home with their families for longer than their predecessors. Living with parents is now the most common living arrangement for 18-34-year-olds in the US: in 2014, over 31 per cent of US millennials lived at home, compared with only 18 per cent of Generation Xers at the same age.8 The figure is almost identical for the UK and even higher in some southern European countries with high rates of youth unemployment.9

A consequence of these trends is a new life stage – a prolonged period of quasi adolescence before people buy houses, get married and have children. Given that we are all living longer lives and retiring later, it may make sense to spend more time exploring different career choices and meeting more prospective romantic partners before settling down (see The Big Interview). But millennials are often just as keen to get on and raise families as their parents were. More important, their delay in doing so may be contributing to an overall decline in consumption.

“The average US consumer is not spending like they used to, at least not throughout this current expansion,” says David Bucolo, senior research analyst at Aviva Investors in Chicago. “Retail sales have not accelerated as much as one may expect given the growth in GDP. In any expansion, you would expect a closer correlation between retail and GDP growth given the large contribution personal consumption makes to the overall US economy.”

Light at the end of the tunnel

Will millennials ever start deploying their cash like previous generations? Bovino’s research in the US suggests the answer depends on the economy. If growth slows, the financial woes affecting millennials will only worsen. Unable to pay off their debt, their credit scores will take a further hit. They would find it harder to borrow to start businesses and buy houses and cars, the kind of big-ticket items that have traditionally driven economic growth.

Persistent low wages for millennials could reduce US GDP by as much as $49 billion a year, relative to S&P’s baseline scenario, holding US GDP growth under 2.5 per cent for the rest of the decade. The Resolution Foundation has published similar findings in the UK, which suggest slow economic growth could consign millennials to lifetime earnings that lag behind those of Generation X in real terms.

But there are signs a more encouraging scenario may be playing out. Stronger US growth in 2017 appears to have enabled more millennials to begin to pay off their student debt and get themselves onto the first rung of the housing ladder, albeit later than previous generations.10 Millennials were the largest group of homebuyers in America in 2017, and a robust economic expansion in Europe is also improving the young generation’s spending power on the Continent. Millennials in emerging markets are faring particularly well.

“We could be on the cusp of that long-pent up demand actually coming through,” says Giles Parkinson, global equity fund manager at Aviva Investors. “US homeownership rates among this age group picked up over previous years in 2017. All else being equal, we could now see above trend growth, not just in the housing market but in home furnishings and DIY.” Home Depot is among the home-improvement retail chains to have reported an uptick in millennial customers last year.11

E-commerce disruption

So what does the belated emergence of the millennial consumer mean for investors? Millennials’ spending has been shaped by the economic pressures they faced in younger years, during their period of relative penury living in their parents’ basements and attic rooms. They are extremely picky customers, and much more likely than other generations to consult multiple online sources of feedback before parting with their cash – and share their own reviews afterwards.

Millennials are more likely to share feedback on purchases.

As they grow more economically powerful, millennials are therefore set to contribute to the continued rise of disruptive e-commerce channels, bringing both risks and opportunities for investors, according to Jason Bohnet, senior research analyst at Aviva Investors in Chicago.

“Having grown up with immediate access to products and services through their smartphones, millennials demand instant gratification as consumers,” he says. “Millennials want fast, cheap deliveries, and that’s had a ripple effect through the whole retail industry, forcing legacy retailers to match online leaders like Amazon. Companies that don’t meet those expectations for fast, high-quality service will be punished.”

The race to win the business of these thrifty, demanding millennial customers is already transforming retail. More and more businesses are offering free shipping to compete with e-commerce platforms and their margins are suffering. Research shows retailers’ earnings before interest and tax (EBIT) decline 30 basis points for every percentage point of online penetration. In other words, the more trade a retailer does online, the thinner its margins become.12 And price-matching initiatives designed to see off the threat of ‘showrooming’ – where consumers visit a store to see a product before buying it online, a typical millennial trait – have also hit profits.

Experiences versus things

A corollary to this trend is that millennials are accumulating less physical ‘stuff’ altogether; partly as a result of their constraints on living space, partly because technology gives them access to leisure options their parents might have had to own outright. Why amass a record collection when you can acquire a subscription to a streaming service such as Spotify? Why buy DVDs when you can log in to Netflix?

Bucolo says millennials are avid consumers of online media, which is spurring the onward rise of the big technology companies, the so-called FAANGS (Facebook, Apple, Amazon, Netflix and Google). These firms added more than $1 trillion in market value last year.

“Companies that provide online visual media are thriving on this, from Google to Netflix,” says Bucolo. “The interesting thing is that while millennials watch less live TV, they watch much more TV overall. Advertisers that can figure out how to incorporate ads into the consumption of digital media will be ahead of the game.”

US restaurant chain Chipotle Mexican Grill offers a case study of a company that has specifically targeted millennial consumers using digital media. In 2014 the company developed an online web series called ‘Farmed and Dangerous’ – a comedy about the evils of factory farming – that caught the eye of Netflix-using millennials and neatly positioned Chipotle as an ‘ethical’ brand

Along with its affordable dishes, this marketing campaign consolidated Chipotle’s position as the favourite restaurant among younger millennials, but a series of subsequent scandals that went viral across social media – including an E-coli outbreak – eroded its popularity. It recently launched a new series of sponsored content on social platform Snapchat to try and win back millennials’ custom.13

The sharing economy

When they do buy physical assets, millennials appear to be willing to share them to earn extra income. As they enter their most economically-influential phase, we are likely to see continued growth in the so-called ‘sharing economy’, which refers to platforms that enable asset owners to lease them out.

Airbnb, on which budget-conscious property owners can rent rooms to tourists, is the best known, but sharing platforms are cropping up in other sectors. French company Zilok enables sharing of equipment such as skis and tents, while US technology company Rent the Runway offers a ‘closet in the cloud’, a subscription service. Customers can rent high-end designer fashion items online and return them via smartphone-enabled self-service scanners at physical shops.

Sharing companies often emerge and rise to prominence very fast on the back of private funding: the sector is attracting more venture capital finance than any other category. Consulting firm Pricewaterhouse Coopers estimates sharing revenues will grow 25 per cent annually over the next decade to $335 billion by 2025.14 This could cause disruption for companies in listed industries.

So where is the next big sharing platform likely to arise? “The interesting one here is cars,” says Parkinson. “There’s currently no big equivalent of Airbnb in the car industry, but it could happen. Picture a commuter who drives to a train station in the morning and picks their car up in the evening on the way home: could that asset be used during the daytime, providing a source of income? Potentially yes, if a company came along with the right technology to make it work. That kind of sharing platform could be attractive, and not just to the younger generation.”

Parkinson points out that the sharing economy won’t necessarily lead to mass disruption among manufacturers, however. To use the car-sharing example, millennials may be less likely to buy a car if they can pay a subscription to rent one – but each vehicle would be in use for longer each day and would theoretically need to be replaced more quickly, holding up demand.

Millennial money

Those characteristic millennial traits – comfort with technology, financial conservatism, a willingness to participate in sharing platforms and rely on online peer reviews – are also reshaping the banking and asset management industries.

Simply offering an online service is no longer enough for companies hoping to help millennials manage their money; a user-friendly smartphone experience is essential.

This has led to the rise of digital ‘challenger’ banks such as US-based Chime and Atom in and Monzo in the UK, which run apps that enable budget-conscious millennials to easily categorise and track their monthly spending, transfer cash and split restaurant bills with their friends.

Financial services based on peer-to-peer models are also emerging to cater to millennials. Inspired by social media, Berlin-based start-up Friendsurance connects small groups of people with the same kind of policy who are hoping to keep claims low. Part of their premium goes into a pool and they receive cash back if any money is left over after small claims. US start-up Lemonade works on a similar principle, with a twist – the leftover cash is donated to a social cause the peer group feels strongly about. The company has hired behavioural economist Dan Ariely to advise on its business model.15

Not all of these new fintech models targeting millennials will succeed. But incumbents may need to adjust to the potential disruption they cause. In asset management, for example, established firms are beginning to specifically target young investors with new digital platforms16 and offering strategies tailored to specific outcomes.

So what are the specific outcomes millennials are looking for? One recent study shows they are relatively risk-averse investors, targeting capital preservation. Millennials tend to hold at least half of their assets in cash, one third in equities and around 15 per cent in fixed income.17 Evidence also suggests they are more likely to target environmental, social and governance metrics than other generations, which may present opportunities for managers that explicitly incorporate ESG considerations.18

Talkin’ bout my generation

While millennials are becoming more influential as consumers and investors, it remains to be seen whether the recent positive trends in millennial spending patterns will continue. One of the drivers behind the recent rise in US growth is the Trump administration’s tax reform plan, which is likely to favour baby boomers at the expense of younger generations, according to the nonpartisan think tank the Tax Policy Center.19

Over the long run, such policies could exacerbate intergenerational inequality and prevent millennials from closing the gap to older generations. While some millennials made gains in 2017, the cohort as a whole is still lagging significantly behind: Americans currently aged between 30 and 39 years of age are calculated to have amassed 46 per cent less wealth as of last year than the equivalent cohort in 2007.20

In millennials’ favour is their growing electoral clout, which should enable them to better defend their own political interests. Voter turnout rates tend to be higher among baby boomers, but millennials are set to be the biggest and most powerful political force in America by 2024.21 The Ipsos research shows millennials in many countries are less likely to be loyal to a particular party than their predecessors, which means politicians will have to devise incentives to earn their votes.

This may already be happening in the UK, where intergenerational unfairness is growing more prominent as a topic of public debate, sharpened by the outcome of the referendum on European Union membership (younger generations voted overwhelmingly for ‘remain’, while older voters tended to favour Brexit). The Conservative government introduced measures to help young people get onto the housing ladder at the last budget in autumn 2017, such as a cut in stamp duty – a tax on purchases – for many first-time buyers.

Robertson says such changes are welcome. Although Brexit could impose new economic pressures on British millennials, he is broadly optimistic about the prospects for younger generations across the West. “It’s easy to forget the progress we’ve made since the crisis. Only a couple of years ago we were worried about deflation, the idea that secular falling prices could persist in some parts of southern Europe. Those fears have now vanished entirely and that’s not a small step.

“Ten years on, we’ve had sufficient time and medicine to recover from the crisis. And if the uptick in growth persists and we can return to some semblance of normality, the outlook for younger generations will only improve,” Robertson adds.

Millennials had a tough start in life, and the stereotypes about their laziness and financial profligacy only added insult to economic injury. But like the baby boomers before them, they are beginning to make their voices heard in business and politics as the shadow of the crisis lifts. Perhaps the kids are alright after all.


1 Millennial myths and realities, Ipsos MORI, July 2017

2 See Paul Taylor, The Next America: Boomers, millennials, and the looming generational showdown, 2016

3 ‘Young people hit by spending squeeze as falling incomes and rising housing costs take their toll’, Resolution Foundation, September 2017

4 Figures according to academic research collated by the Huffington Post. See ‘FML: millennials are screwed’, December 2017

5 ‘2014 Wells Fargo millennials study’, April 2014

6 ‘Famously frugal: nearly 40 per cent of millennials will stash their tax refund’, NBC News, March 2017

7 ‘The looming student loan default crisis is worse than we thought’, Brookings Institution, January 2018

8 Pew Center for Social Research

9 In 2015, 67 per cent of young men aged 18-34 lived with their parents. Similar figures were recorded for Greece (63 per cent) and Malta (66 per cent). See Ipsos, Millennial myths and realities.

10 ‘Millennials dominating mortgage originations at the expense of taking on more debt’,, December 2017

11 ‘Home Depot is retail’s bright spot as it courts younger shoppers who prefer DIY’, CNBC, November 2017

12 ‘E-commerce: the long(er) path to profitability,’ Morgan Stanley, May 2016

13 ‘School of Guac: Chipotle courts millennials with a Snapchat show’, Digiday UK, October 2016

14 The sharing economy, PriceWaterHouse Coopers, April 2015

15 ‘Lemonade aims to shake up insurance with charity promise’, Financial Times, September 2016

16 ‘Morgan Stanley woos millennials via robo-adviser with ETFs’, Bloomberg, December 2017

17 Wells Fargo

18 ‘Sustainable investment joins the mainstream’, The Economist, November 2017

19 ‘An 11th-hour raid by the wealthiest baby boomers’, The Atlantic, November 2017

20 ‘The rich get richer, and millennials miss out’, The Economist, November 2017

21 ‘Millennials to pass baby boomers as largest voter-eligible age group, and what it means’, CNN, July 2017

Related views

Important information


Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable, but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. Some data shown are hypothetical or projected and may not come to pass as stated due to changes in market conditions and are not guarantees of future outcomes. This material is not a recommendation to sell or purchase any investment.

The information contained herein is for general guidance only. It is the responsibility of any person or persons in possession of this information to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. The information contained herein does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it would be unlawful to make such offer or solicitation.

In Europe, this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK, this document is by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: 80 Fenchurch Street, London, EC3M 4AE. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

In Singapore, this material is being circulated by way of an arrangement with Aviva Investors Asia Pte. Limited (AIAPL) for distribution to institutional investors only. Please note that AIAPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIAPL in respect of any matters arising from, or in connection with, this material. AIAPL, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital Markets Services Licence to carry out fund management activities issued under the Securities and Futures Act (Singapore Statute Cap. 289) and Asian Exempt Financial Adviser for the purposes of the Financial Advisers Act (Singapore Statute Cap.110). Registered Office: 138 Market Street, #05-01 CapitaGreen, Singapore 048946.

In Australia, this material is being circulated by way of an arrangement with Aviva Investors Pacific Pty Ltd (AIPPL) for distribution to wholesale investors only. Please note that AIPPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIPPL in respect of any matters arising from, or in connection with, this material. AIPPL, a company incorporated under the laws of Australia with Australian Business No. 87 153 200 278 and Australian Company No. 153 200 278, holds an Australian Financial Services License (AFSL 411458) issued by the Australian Securities and Investments Commission. Business address: Level 27, 101 Collins Street, Melbourne, VIC 3000, Australia.

The name “Aviva Investors” as used in this material refers to the global organization of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the United Kingdom.

Aviva Investors Canada, Inc. (“AIC”) is located in Toronto and is based within the North American region of the global organization of affiliated asset management businesses operating under the Aviva Investors name. AIC is registered with the Ontario Securities Commission as a commodity trading manager, exempt market dealer, portfolio manager and investment fund manager. AIC is also registered as an exempt market dealer and portfolio manager in each province of Canada and may also be registered as an investment fund manager in certain other applicable provinces.

Aviva Investors Americas LLC is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aviva Investors Americas is also a commodity trading advisor (“CTA”) registered with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). AIA’s Form ADV Part 2A, which provides background information about the firm and its business practices, is available upon written request to: Compliance Department, 225 West Wacker Drive, Suite 2250, Chicago, IL 60606.