Which Generation Has Cut Spending The Most?

Yesterday, Gallup released the results a new poll. It explains how different generations have pulled back spending since 2008. The results are interesting, though not entirely unsurprising. I think you can learn a lot from the behaviors and attitudes of the different generations by looking at the differences in how they've reined in their spending.

First, here's the chart that Gallup provides in its report:

Gallup spending generation.gif

It's important to know what Gallup actually asked to get these numbers, so you can understand the context. They asked:

U.S. consumers to report how much they spent "yesterday," excluding normal household bills and major purchases such as homes and cars

It's a little unclear precisely what this means. But if I were asked this question, I would think it does not include fixed expenses, and essentially refers to variable spending on discretionary items.

As I mentioned, all generations are pulling back their spending. That's in response to factors like employment turmoil, uncertainty about the future and less credit availability. On a superficial level, it looks like all generations have had roughly the same reaction. But let's dig a little deeper.

Here's a graph I made, based on the data above. I wanted to see the actual percentage changes in spending. That's more meaningful to me than raw numbers.

change in spending by generation.PNG

I find this graph fascinating, especially because of its downward sloping nature. My first inclination was to say that, the younger the generation, the more unconcerned about the recession, since spending has been curbed less as you move from oldest to youngest. I would have expected this line to be more parabolic, where the oldest and youngest generations had cut their spending the least, while the Baby Boomers and Generation Xers had cut the most. I would expect that because the oldest generations are on a fixed income and generally retired while the youngest can more easily move from job to job without disrupting their lifestyle or family.

There's a temptation to associate spending in an economic climate like this to responsibility. It's responsible at a time of uncertainty to spend less than you would when times are good. This might imply that younger generations are less responsible than older ones. But I'm not sure this is entirely fair for the reason I describe above. The youngest generation does not have nearly as many responsibilities as a Baby Boomer or Generation Xer who probably has a few kids, mortgage, etc.

That means the real surprise is the Greatest and Silent Generations. But then, maybe this shouldn't be too shocking either. These are the Americans who lived through the Great Depression. They saw just how bad things could get, and it was likely a lesson they never forgot. So even though they probably have the least at risk during a recession, they understand the danger that exists better than any of the others.