Boomers vs Millennials: older generation still afford luxuries while rest tighten belt

New data released today has painted a revealing picture about the way each generation is spending amidst the latest cost-of-living pressures. While the older generation was able to afford luxuries like home renovations and eating out, younger Australians were hit hard by higher grocery and fuel prices.

Inflation is on the rise, reaching 6.1% in the June quarter (ABS), and now being tipped to peak at 7.75% by Christmastime. As a result, the Reserve Bank of Australia has been hiking the cash rate, seeing millions of homeowners' biggest ongoing expense, their mortgage, increase by hundreds of dollars since May.

It’s no secret that expenses are higher, and that belts are being tightened. New data, pulled from 35,000 users of Frollo's personal finance app, has showcased how Australians’ spending habits have increased significantly within the current environment.

Overall consumer spend has increased

• Groceries – up 18%

Spending on groceries has increased by 18% between May and July 2022, compared to the same quarterly period in 2021. The average amount Australian consumers were spending each month was $663 in the June quarter, compared to $592 in the same period in 2021.

• Fuel - $19 more expensive

Unsurprisingly, fuel prices are also up in the May to July 2022 quarter, with a per month average spend of $121 now commonplace, compared to $102 for the same period last year.

• Healthcare - $35 more expensive

Spending on healthcare and medical expenses is also up year on year for the May-June quarter. The average monthly spend in 2022 was $232, compared to $197 each month over the same quarter in 2021.

• Insurance - $36 more expensive

The value of spending on insurance was also higher in the most recent quarter, reaching $318 each month in average spending, compared to $282 in the same period in 2021.

• Home renovations and maintenance – Almost doubled

Given that the Australian construction sector is still juggling supply chain delays, material shortages and skilled labour shortages, all while higher inflation rages, it’s not surprising that the average monthly spend on home renovation projects almost doubled. From May – June 2022, the average monthly spend was $286, compared to only $149 in the same period in 2021.

Boomers are still paying to renovate and eat out

Interestingly, when you look at the generational breakdown of spending habits of Australians, as per the Frollo data, there are clear differences in where Australians are directing their cash flow.

Baby boomers are the biggest spenders when it comes to renovation and home maintenance, making up the bulk of the ‘renovation nation’ that upgraded their homes in that quarter. Boomers more than doubled their monthly spend in this category, up 164%. Comparatively, spending on groceries and fuel was miniscule at 1.7% and 1.9% respectively.

Gen X was found to be the segment most impacted by the recent petrol price increases, spending 34% more on fuel per month in 2022 than in 2021. While parts of the country were in lockdown between May-June 2021, those surveyed from this generation may be the most likely to travel to work via car, explaining the sharp increase.

Millennials are going out significantly less than Boomers thanks to the rising cost-of-living pressures. Monthly spending on restaurants, pubs, cafes and takeaway across the board was up 22%, from $1,675 to $2,048. However, Boomer hospitality spend was found to have increased the most (+35%). Meanwhile Millennial hospitality spending increased the least (+11%). This may imply that boomers are still able to afford meals out, compared to the younger generations.

When you consider that Boomers are the generation more likely to have paid off a home loan, compared to Gen X, Millennials and Gen Z, it’s not surprising that they’re not seeing the same impacts to their spending habits amidst rising mortgage rates.

How can Australians reduce their spending in 2022?

It’s a challenging time for all Australian household budgets, especially those repaying a mortgage. Luckily there are some simple tips and tricks worth considering to help reduce your expenses and keep your spending down.

1. Increasing your income – Changing your budget around is what experts will recommend, but there is no substitute to finding a way to increase your income. Consider starting a side hustle, freelancing for one of your skills or even monetising a hobby – even if just until inflation falls again.
2. Compare your insurance and utility providers – Don’t set and forget your car insurance, chosen energy provider or phone plan. You never know what competitive deals providers are willing to offer new customers if you do the research and switch to a better deal. Cutting down your big expenses, like these bills, could significantly help your budget in 2022.
3. Compare savings accounts – What steps are you taking to grow your nest egg? The good news about rising rates is that it typically means your savings account interest rate will rise too. Not every provider has passed on rate hikes to customers, however, so it’s crucial you shop around to see if you’re still getting the best deal for your needs.
4. Refinance your home loan – If your mortgage repayments are rising and you’re starting to struggle to find room in your household budget, it may be worth considering refinancing. This option will not suit all homeowners, but if you’ve built up enough equity in your home loan, it could be time to compare lower-rate or lower-fee home loan options and give yourself a rate cut.

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