When it comes to personal finances, millennials follow their friends
By Kristin McGrath
November 1, 2013
My parents said it, and perhaps yours did as well: “If all your friends jumped off a cliff, would you do it, too?” It was a rage-inducing line that generally corresponded with me not getting what I wanted. Yet the underlying advice is pretty solid: “Think before you follow.”
Those who don’t learn that lesson grow up to embody another clichéd saying: “Keeping up with the Joneses.” And millennials (young adults just out of college to those in their early-30s) are particularly influenced by what others buy. According to an October 2013 survey from the American Institute, 78 percent of millennials tend to model their financial decisions after their friends. Meanwhile, 66 percent try to keep up with their peers based on the neighborhoods they live in, and 64 percent base their clothing purchase on their peers’ choices. Almost two out of three millennials say they experience pressure to eat at certain places or own certain gadgets because their friends do.
Because I’m on the tail end of the millennial generation, this got me thinking about how much peers’ financial habits affect my own. I’m sure I do spend more than I would have if I lived in a Facebook-less vacuum. Seeing a cute pair of shoes in a friend’s Facebook picture has influenced me to pick a more expensive (and stylish) pair for myself when shoe-shopping. Plus, I already have a travel addiction, and being exposed to around-the-clock vacation pictures, I’m sure, fuels that habit.
The notion that constant exposure to your friends’ lives via social media causes you to spend more isn’t new. A September 2012 study from a pair of marketing professors from Columbia University and the University of Pittsburgh found a positive correlation between credit card debt and frequent social media use.
At the same time, it’s not as if I haven’t gleaned some positive money-management habits from my friends. For every vacation status update, I’ll see a “Paid off my student loans” or “Just made my last car payment” update. I talked with a friend about our respective emergency savings funds just last week (exciting, I know) and chatted with a friend about his super-frugal wedding and “saving up for a baby account” over lunch this week. Another friend explained to me how he and his wife hadn’t eaten at a restaurant in more than six months — they flip open a cookbook with their eyes closed every night and cook whatever recipe they land on. Whenever I have these conversations, I feel inspired — and that inspiration outlasts the temptation I feel when I see a nice article of clothing or a “Sitting on a beach with a cocktail” Instagram photo.
I’m sure it helps that I’m friends with people who don’t place a high value on status symbols. Those with high-spending acquaintances probably pay more to keep up with their peers. How do your friends’ money habits influence your own? Do they inspire you to save — or urge you to spend? If you’re part of the latter group, here’s some advice from the personal finance blogosphere:
The Simple Dollar points out that, thanks to how trendy thrifty living has become, keeping up with the frugal “Smiths” could replace keeping up with the extravagant “Joneses.”
Making Sense of Cents confesses a few times the “jealous monster” takes over and encourages overspending.
My Simpler Life has 20 ways to reroute the urge to spend. One of them? Surrounding yourself with frugal people.
Modest Money contemplates how the digital age pressures us to spend more by giving us a 24/7 news feed of others’ wealth and lifestyles.
Well Heeled Blog argues that travel has become the newest status symbol.
Money Ning provides advice for changing the dynamic of friendships that are costing you too much money.