Ask any parent the last time he slipped his twenty-something a $20 or she deposited a little extra dough into her college student’s dwindling checking account and, odds are, most won’t have to think past yesterday.
But perhaps parents should think twice before unfastening their wallets (I’m going to totally regret saying that as soon as my parents read this article). According to Digitas’s “Affluence in America: The Next Generation” study, the Richie Riches of the millennial population (18 to 34 year olds living in a home with an annual income of more than $100,000) are the largest current and potential spenders of luxury items—making them a prime target for luxury marketers.
“Luxury marketers are still reaping the rewards of boomer affluence. However, boomers are entering their retirement years when people characteristically spend more on health and wellness than on luxury products and experiences,” says George Scribner, SVP of account planning for Digitas. “To be relevant to the new generation of affluent adults, luxury marketers need to change how they do business. This requires a digital-first approach that integrates social, mobile, and content as a means of engagement, acquiring customers, and driving sales.”
The study separated the affluent millennials into five personas and three categories. The aspiring segment, whose household rakes in $100,000 to $199,000 a year, contains two cases of comfortable living: the aspiring head of household (HOH) and the aspiring children. According to the study, the aspiring HOH tends to be about 30 years-old, married with kids, and employed in the technology or finance field. The aspiring child, on the other hand, is approximately 23 years-old, lives at home with the parents, and pursues a job in either retail or what the study identifies as “passion” careers, such as those in the entertainment industry. Notably, the aspiring children tend to spend about four-times their humble income due to access to mommy and daddy’s wallets.
“One of the big surprises of our study was the spending power of young Gen Ys (average age 23) who are still living at home with their parents. They are spending—on average—from from $71k to $93k annually even though they make as little as $20k themselves,” says Scribner. “Perhaps, this dynamic of borrowed wealth indicates that their parents are willingly supporting them, rather than giving them a modest allowance. It may also indicate the shared values that Gen Ys—also called Echo-Boomers—have with their parents.”
Following the aspiring spenders are the emerging spenders, who also have an annual household income of $100,000 to $199,000. The emerging HOH is slightly younger than the aspiring HOH at 28 years old and tends to live the bachelor lifestyle. He or she most likely works in the creative, financial, technology, architecture, advertising, and real-estate realms.
The final group is the affluent household that brings in an annual household income of more than $200,000. The affluent children are around the same age of the aspiring children and also reside in their parents’ homes. However, these wealthy whippersnappers spend three times their income due to access to the household income—which tends to be about 10 times their own meek earnings, according to the study. Like the aspiring HOH, the affluent HOH also leans toward 30-year-olds who are married with kids. However, this HOH tends to have careers in medical, legal, financial, software design, and engineering.
“Diving further into the data, one sees that affluent children have the most affluent lifestyle of any segment,” Scribner says. “They spend more than their counterparts. They live in the most expensive homes. They have access to more country clubs and vacation homes.”
Why do young consumers have the urge to splurge? According to the study, Generation Y spenders cite authenticity (“cool” brands), nostalgia (brands with a legacy), and utility (usefulness) as the three primary drivers that lead them to invest in the lap of luxury. So perhaps members of the affluent Generation Y club are more likely to be brand loyal than their lower and middle class counterparts.
However, now the question remains: Are these young adults with the deep pockets spoiled or adaptable to the times? I believe this may be a generational debate. In today’s digital age, it’s rare to see a college student without a laptop and the number of “unintelligent” phones is dwindling. Plus, it’s becoming imperative for young people to widen their digital tool belts. With jobs as scarce as they are, recent college grads and young adults need to be jacks-of-all-trades to distinguish themselves from the herd of applicants.
Now, do all the members of Generation Y need a Chanel laptop case? I think not. However, in this day and age, I do think it’s crucial to take into account that technology is becoming less of a luxury and more of a necessity.