Stark difference in the cost of living between generations.
The so-called ‘millennial’ generation are suffering from a far higher inflation rate than the UK average thanks to their spending on smartphones, rent and dining out.
New research by Fidelity International has looked at inflation by generation and found that those aged under 30 face an inflation rate that is almost double the average for the UK - and three times that of a typical pensioner.
Millennials spend proportionally more on dining out, smartphone and internet subscriptions, rent and household bills. They also spend far more on education which significantly pushes up their average cost of living.
In contrast, pensioners are enjoying much lower rates of inflation as more of their money is spent on categories that have seen smaller price increases such as food and non-alcoholic drinks.
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Inflation rates across the generations
|
|
Millennials (Under 30s) |
Generation X (30–49) |
Baby Boomers (50-64) |
Over 65s |
Over 75s |
Consumer Price Index |
|
March 2016 |
0.9% |
0.4% |
0.4% |
0.3% |
0.3% |
0.5% |
|
March 2015 |
0.7% |
-0.2% |
-0.1% |
-0.2% |
-0.2% |
0.0% |
Inflation is measured by monitoring the prices of a basket of everyday goods, but if you look deeper generations spend their cash on different things and this means the cost of living can vary massively.
“The headline inflation rate tells only half the story. On the surface it may look like the cost of living has barely increased over the last year, but scratch the surface and there is a clear generational divide when it comes to the cost of living,” says Maike Currie, investment director for personal investing at Fidelity International.
Millennial spending
The younger generation spends far more than anyone else on housing and education which pushes up their inflation rate.
The average Millennial spends £126 a week on rent and household bills and £41 a week on education. These are both areas of spending that have seen significant increases in cost in recent years. In contrast over 75s spend just £49 a week on housing costs and £10 on education.
“Millennials can be dubbed ‘Generation Inflation’. Our analysis shows the current rate of increase in the cost of living is three times more for millennials than it is for retirees, with those under 30 spending a greater proportion of their income on the areas which have suffered the highest price increases – education and housing,” says Currie.
“This leaves them with little left to save and the challenge of generating higher returns to keep up with the pace of inflation. Unfortunately for millennials this challenge is being met with equally low wage growth – wages remained below their pre-crisis average in 2015 despite unemployment falling back which means this group is also being hit by negative real earnings.”
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