NerdWallet's Smart Money Podcast - Gen Z, Millennials, Gen X, Boomers — Are You Spending Like Your Generational Peers?

Episode Date: October 30, 2024

Learn how your spending compares to others in your generation using insights from the Bureau of Labor Statistics’ annual Consumer Expenditure Survey. How does your spending compare to other people your age? Are you saving enough compared to others in your generation? Hosts Tess Vigeland and Anna Helhoski are joined by NerdWallet’s Senior Economist Elizabeth Renter to break down the latest Bureau of Labor Statistics Consumer Expenditure Survey. They dive into how income and spending patterns shift across generations, from Gen Z to the Silent Generation, and discuss average income peaks, the changing ratio of spending to income, and how generational differences in housing, healthcare, and food expenditures reflect larger economic trends. Enter your monthly after-tax income into NerdWallet's free budget calculator to create a suggested budget: https://www.nerdwallet.com/article/finance/nerdwallet-budget-calculator Then, Tess and Anna touch on key money headlines from the week, including updates to IRS tax brackets and deductions for 2025, the CFPB’s action against Apple and Goldman Sachs over Apple Card customer service failures, and the 50th anniversary of the Equal Credit Opportunity Act, which gave women the right to access credit without a man’s signature. In their conversation, the Nerds discuss: Bureau of Labor Statistics Consumer Expenditure Survey, generational spending habits, income-to-spending ratio, peak earning years, fixed income for retirees, healthcare spending by generation, food spending across generations, retirement savings trends, Gen Z spending habits, baby boomer financial challenges, millennials saving for retirement, housing costs by generation, transportation spending, food away from home trends, discretionary spending, debt in retirement, social security income, average income by age group, and generational wealth. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Welcome to NerdWallet's Smart Money Podcast. I'm Tess Vigeland, filling in for Sean Piles. And I'm Anna Helhosky. And this is our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money. We'll go deep into a single topic, then leave you with the latest money headlines. Today, we are talking about my generation. And my generation. All the generations. The Bureau of Labor Statistics recently released data from its annual Consumer Expenditure

Survey that shows our income and spending and how it changes from one stage of life to the next. I love this. We have NerdWallet's senior economist, Elizabeth Rentor, here with the key takeaways from her analysis of the report. Elizabeth, welcome back to Smart Money. Hey, thanks for having me. Always good to chat with you both. So to spend money, you usually have to make money. So first off, can you talk about how typical incomes shift throughout our lives?

Sure. So when we start out as young adults, our incomes are typically pretty low relative to other adults. Whether we're college students or new in the workforce, we're on tighter budgets when we're younger. And average incomes rise as we age to a certain point. People are most often at their peak earning power in late middle age before they retire. And from there, incomes start to decline. In the context of our current generations, Gen Z has a fairly low average income, but the oldest among us, the silent generation, bring in even less. These people are around age 80 and older. They're typically on a fixed income, and some are receiving only Social Security. Elizabeth, the BLS report says that on average, Americans spent

88% of their income after taxes in 2023. Can you tell us a little bit about how that income to spending ratio plays out across the generations? Well, if you think about average income rising as we move from young adulthood into middle age, it makes sense that you'd have to spend less of your income to get by each year. And the BLS data tells us that Gen Z spent 93% of their annual income after taxes. Millennials spent 83% and Gen X, shout out Gen X, spent 84%. But when you get into older age groups, you have two things happening, higher and higher health expenses and decreasing income. So baby boomers spent 95% of their post-tax income in 2023,

and the silent generation spent 108% of their income on average. That 108% might strike you as strange. How does someone spend more than they bring in? Well, more than likely, this generation is spending down savings, like the retirement savings they worked so hard for over the years, and they could be also taking on some debt. No, don't do that. Well, we know that millennials and Gen Xers, shout out as well, are in their peak earning years. And that means it's the time when they have the most money to spend.

But it's also the best time for them to save. So how's that going for them? That's right. It's the right time to maximize that 401k, set aside savings for the kids, retirement, and so on. And the BLS survey gives us some insight there. When it comes to retirement and similar expenses, millennials and Gen X are spending close to 15% of their total expenditures. The survey suggests that Gen Z are spending close to 12% in this category. But this raises an important caveat of this data set. Without going

too far into the weeds, the more detailed we get in the spending categories of this survey, the larger the margin of error. If there are any Gen Z people listening and thinking 12%, who's doing that? You know, 12% can seem pretty high for someone who is 20 years old, for example. But this is an average. And what's more important than the exact percentage or the exact dollar amount is how it relates to the similar percentages of other groups. So thinking about what that spending comprises, and this is as absolutely nerdy as it gets, I'm picturing the overlap between what inflation data usually shows and Maslow's hierarchy of needs. So am I right to guess that food and shelter probably

take up a big chunk of that spending? You're absolutely right, Ana. And interestingly, food accounts for about 12 to 13% of total expenditures among all generations. The share of spending on food is really pretty similar from generation to generation. However, those generations with the lowest incomes are having to put a greater share of total expenses towards housing. And the difference in food and housing in this regard tells us something about prices for these things. When it comes to food, if your budget is tight, you can really change the foods you eat to keep your grocery bill under budget. When it comes to housing, however, you really only have so much power. The PB&J of housing,

for example, isn't an option in every city and every town. And when it is, it's definitely not the place you're willing to live sometimes. Now, Elizabeth, I self-identify as a takeout monster. So as a millennial, how do I stack up against the rest of my generation and the generations I'm sandwiched between when it comes to food spending? So many sandwich references. As I mentioned, there isn't a whole lot of difference on food spending overall as a share of total expenditures, but there are some interesting differences across generations when you look at grocery spending versus what the BLS refers to as food away from home. Groceries account for almost 7% of Gen Z's total spending, but about 8% for all other generations. And food away from home, so Anna, your takeout, restaurant spending, accounts for nearly as much, 6% of Gen Z's total spending, whereas it's only about 4.5% to 5.5%

of other generations. In other words, Gen Z's spending on groceries and food away from home is really, really similar, whereas other generations spend a notably larger portion on groceries than they do on dining out. So Elizabeth, beyond food habits, are there some other types of spending that shift as you age? Yeah, I think the starkest change in spending categories happens with healthcare. That's one category that you can just see rise from generation to generation. Healthcare accounts for just 4% of Gen Z's total spending on average, and it rises reaching almost 16% of the expenses for the silent generation. And of course, we all need to get from place to place somehow,

train, bus, of course, here in the US by car. How does transportation stack up? The interesting thing here with transportation that stood out to me was that the highest earning generation spend the most dollars on transportation, but definitely not the largest portion of their spending pie. For instance, Gen X spent $17,000 on average on transportation in 2023, compared with just under $10,000 by Gen Z. But this accounted for about 18% of Gen X's spending versus 19% of Gen Z. And it points to the dramatically different incomes, but could also suggest that Gen X is doing more expensive travel. So not only paying

for their car and their gas, but perhaps more flights and more costly flights at that. So was there anything else in the data that surprised you, Elizabeth, or confirmed something that you may have already suspected? I think generational data is interesting primarily because we say it is. I mean, really, this boils down to being about life stages more than anything, and not necessarily about generations having really, really unique traits. So when I see that reflected in the data, there's some satisfaction there. Sometimes you run across something really interesting or surprising.

And I think that for me in the 2023 survey, it was the really close shares of spending that Gen Z is doing on groceries and food away from home. But overall, the data confirms that our spending behaviors are largely changing according to where we are in life, not what title has been placed on our cohort. All right. Well, if all this talk about spending has you thinking about your budget, check out NerdWallet's free budget calculator, which we'll link to in today's show notes, or just search online for NerdWallet budget calculator. Elizabeth, thanks so much for helping us out today. And if you wouldn't mind, stick around. We've got something you might want to chime in on in a bit.

Yeah, absolutely. Happy to. Up next, a few money headlines from the last few days. Tess, since it's almost Halloween, how about something spooky? Oh, I'm shaking in my boots. Taxes. Oh, no, not already. Well, not too spooky, actually.

The IRS is out with the new tax brackets for 2025 and a new standard deduction. Ah, yes. It's been raised to $15,000 a year for single filers, $30,000 for married couples. We're not going to go through all the new tax brackets. You can find them at irs.gov. But a reminder that these are for tax year 2025. So that's the taxes that are due in 2026. There are also increases in the earned income tax credit and in how much you're allowed to save in health savings accounts. If you're looking to give away some money, the largest gift you can give without having tax implications will be $19,000, up from

$18,000 this year. If anyone would like to give me $19,000, I'd be happy to take it off your hands. Oh, same. Trick or treat. The Consumer Financial Protection Bureau, or CFPB, announced it ordered tech giant Apple and the investment bank Goldman Sachs to pay close to $90 million in fines and customer redress because of issues with the Apple credit card. The CFPB said both companies contributed to breakdowns in customer service and other issues that affected hundreds of thousands of car users. The bureau says the companies caused consumers to face long waits to get refunds from disputed charges,

failed to follow federal rules for investigating those disputes, and misled customers about interest-free payment plans for Apple products. Apple will pay a $25 million penalty, while Goldman Sachs will pay $45 million in penalties, plus nearly $20 million in customer redress. Goldman is also not allowed to launch any new credit cards until it can prove it will, quote, actually comply with the law. And finally, Anna, do you have a credit card? Several, actually. Elizabeth Rentor, let's bring you back in here. How about you? Oh, absolutely. Yes. And you have a mortgage too, right? Actually, true to my name, I'm a renter now.

Ah, but you've had a mortgage. I have. I've had several in the past. All right. Yeah. And I used to have a mortgage and I now have multiple credit cards. And ladies, up until 50 years ago this week, that would not have been possible. This week marks the 50th anniversary of the Equal Credit Opportunity Act, which gave women the right and ability to take out loans and apply for credit cards in their own names without a man's signature. Hard to imagine today, but it's true. You had to have a man co-sign. President Gerald Ford signed the ECOA into law on October 28th, 1974. I, for one, am eternally grateful for my financial independence.

Yeah, me too. Amen. You know, it's really hard to comprehend what that was like since we're all of generations that grew up after the law was passed. It basically made it illegal for creditors to say you couldn't have a loan or a credit card based on the fact that you are a woman or unmarried or divorced. And we'll note that this wasn't just a gender issue. The law prohibited

discrimination in lending based on race, religion, national origin, sex, marital status, age, or participation in public assistance programs. Yeah, and three years ago, the CFPB expanded a part of the law called Regulation B to include protections based on sexual orientation and gender identity, which feels surprisingly recent. Yeah, no kidding. Just three years ago? Wow. Well, I'm certainly grateful for the progress over the years. Yep. Three cheers to the ECOA. I'm not always glad it's possible to rack up credit card debt, but I am very, very glad that the decision is up to me and not anybody else.

Hear, hear. And that's it for this week's Money News. We always welcome your money questions and comments. Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD or send us a voice memo at podcast at nerdwallet.com. And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes. Today's episode was produced by Tess and myself and edited by Rick Vanderkneife. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes

and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.