Generational Spending Habits: Who Spends The Most?

While millennials might get the blame (or credit) for killing a lot of different industries with their changing spending habits, Generation Z entering the economy in a more significant way has further changed how money is being spent. Post-pandemic economic concerns have similarly influenced people's changing spending habits, with many citing the rising costs of things like bills, rent, and groceries as reasons why their spending has changed as well. In fact, according to an Intuit Credit Karma survey, 53% of Americans reported their financial situation worsened in 2023, making the idea of generational spending habits even different than before.

When trying to determine what generation spends the most money, it's important to factor in how spending categories have changed today. While it can be easy to blame irresponsible or unrealistic spending on a certain generation's financial difficulties, it's far more accurate to factor in how much more money it costs for the same necessities as before. Perhaps the best example is housing, which, according to the World Economic Forum, is the biggest spending category, accounting for 30% of a person's annual spending amount. What's more, when you consider that increased housing prices are also helping to fuel our current inflation (per a March 2024 Consumer Price Index report from the Bureau of Labor Statistics, housing contributed to the 0.4% increase in inflation in February and 3.2% over the previous 12 months), it's no wonder people are financially struggling to keep up — especially in younger generations who don't own yet.

According to data from the Bureau of Labor Statistics, Generation X (that is, people born between 1965 and 1980) spent the most money in 2022 with an average annual expenditure of $91,382. The top spending categories for Gen X were housing, transportation, and food (in that order). There are additional factors that contribute to Gen X's high spending in these categories, but we'll talk about those later. The next highest-spending generation group was millennials (those born between 1981 and 1996) with an average annual expenditure of $74,782 for the exact same top-spending categories as Gen X. Some notable differences were that owning versus renting was more evenly split amongst millennials than for Gen X (who are more likely to own their housing). Also, while 31% of Gen X spending went to housing, housing accounted for 35% of millennial spending.

The lowest-spending generation group, meanwhile, was Generation Z, with an average annual expenditure of $47,975. Housing, not surprisingly, was the largest expenditure, accounting for 36% of Gen Z's total annual spending. Interestingly, food expenditure for Gen Z was almost the same as for Gen X, with both spending around 12.5% of their annual expenditure. Annual expenditures for baby boomers and the Silent Generation fall in the middle, with annual spending of $66,362 and $52,005, respectively. While housing is still the largest spending category for both generations, transportation expenses fall off for the Silent Generation, as well as pension and Social Security contributions since they're more than likely on the receiving end.

As mentioned previously, most of the current increases in expenditures are for the same spending categories as in the past, only now they cost more due to inflation and rampant increases to prices. Increased housing prices have also been a significant contributing factor to the fact that almost one- third of American parents (with children over 18) continue to support their Gen Z kids financially, with 64% of them allowing their children to continue living with them, according to Intuit Credit Karma. Doing the basic generational math, this housing situation places a higher financial burden on Gen Z's parents, who are mostly Generation Xers. In fact, 76% of parents who reported financially supporting their adult children also said that doing so impacted their own finances. This contributes to Generation X's position as the largest spending generation since they're supporting additional adults in the household.

While most spending increases are a result of inflation and economic changes, there's one category that's faced a unique shift post-pandemic. Perhaps nowhere is the idea of differing spending priorities among the generations more clear than when it comes to entertainment spending. According to 2023 data from Intuit Credit Karma, while 46% of Americans have reported spending less frequently on entertainment now compared to before the pandemic, Gen Z alone reported spending increases in all entertainment categories (including concerts, movie theaters, and theme parks). Thirty-five percent of Gen Z respondents reported cutting back on dining out as the top way they afforded their increased spending budgets, while 30% said they borrowed from savings and 22% said they borrowed money from family or friends.