If you were to listen to baby boomers, Gen X, and politicians, you would think that the reason millennials are unable to buy a home is because they are too busy in the local café buying (and consuming) avocado toast with coffee.
That will never happen to your kids, I hear you say. And it probably won’t because the bank of Mum and Dad, who are medical professionals with high income, will help them along.
But the latest spending habits relating to coffee are interesting.
The problem is that Baby Boomers and Gen X were brought up in an environment where being frugal was not a choice – it was a necessity. I am Gen X, and I don’t think I bought a coffee from a coffee shop until I was in my late 20s. But then again, there were no coffee shops around back then unless you called a greasy café whose idea of coffee was an instant mix from the local supermarket or the weak percolator stuff where the coffee was probably recycled a few times.
There’s more.
It’s not just coffee. When young, Baby Boomers and Gen X had no internet either. Nor were there fancy shops to entice into spending. And no bank gave out a credit card unless you were earning decent dough. And there were no Buy Now Pay Later schemes either, which meant if you had $5 in your pocket, that was all you could spend.
And that meant we saved a lot of dough. And it seems that habit has not changed.
But back to coffee.
Recent research suggests that Gen Z spends, on average, about $1,200 a year on coffee. Baby Boomers were, as expected, tighter with their spending, with only $550 spent on coffee despite them being the category with the most wealth. Millennials, in comparison, spend a whopping $1,500 on takeout coffee a year.
And before you think the research was organised by ‘the anti millennial club” it was not. It was conducted by Ronald McDonald. I am sure it was not him personally, but yes, it’s the same mob that runs the Golden Arches.
Now, being an accountant, I undertook complex science and mathematical calculations. To be honest, there was no science, and the calculations were done via AI. Anyway, I concluded that on average a millennial could spend about $58,000 on coffee take out during their lifetime. And that equates to approximately 2,500 litres of the stuff. Now, that is some serious caffeine boost.
I had another thought, too. Many millennials are employed, so surely they get the stuff free at work? Well, most work from home, so that could explain things, but it seems of the 35 per cent whose workplaces offer free coffee, 37 per cent said they would rather pay for a “nice” one outside of the office – even if they could not afford to do so.
But to give you an idea of what coffee means to us, about 50% of coffee drinkers do not feel “human” in the morning until they’ve had their first cup.
Latte was the most popular style, with 23 per cent favouring it, followed by cappuccino on 21 per cent and flat white on 11 per cent. Of those surveyed, 74 per cent said they preferred their coffee milky, with 18 per cent liking it black. Nearly two-fifths described themselves as a true coffee lover, and 9 per cent claimed to be a “caffeine addict”.
But it seems we are a bit obsessed with coffee, too. 30 per cent are so fussy about their daily cup that they do not trust friends, family or colleagues to make it to the exact specifications they get with a takeaway cup. Why am I telling you this? I have no idea, but it gives you an idea of how our young people think and what is important to them.
But here is the worrying bit.
56 per cent said coffee was a luxury they would not want to live without. And when that is said, you know they could be on a slippery slope toward misery.
What I have found is that children from high-earning parents slip towards that misery faster than those who do not.
Because when you have a high-earning parent, spending $1,500 a year on coffee makes perfect sense.
But I think that is missing the point.
I blame parenting. We now live in an environment where, as parents, if we do not give everything our child wants from the moment they are conceived, we are considered a bad parent. And it creates a false sense of entitlement, and as soon as someone says the word “no” they simply cannot cope.
It was only a couple of weeks ago that I met a GP who told me their child (who is 5 years old) will get everything they ever need. I know parents who will spend money renovating their home so that each child has ‘their own space” – whatever that means.
Because this makes me wonder how the next generation will be as business owners. Being a business owner means you will get hit from all angles. As soon as you talk about luxuries, you cannot give up; it does not bode well for them in their personal lives when things turn sour or as business owners when tough decisions need to be made.
I recently read an article backed up by scientific proof that children who have high-income parents are more aloof, have fewer friends, are more anxious and have more mental health issues than children of low-income families. They gave a number of reasons for this, ranging from pressure to achievement to absent parenting because parents were working all hours of the day to generate that high income.
But coming back to coffee again.
When I think about these things, I often try to work out why we do what we do. And I worked out that takeout coffee is not necessarily about the environment of the coffee shop – you are not there for the ambience because it is takeout coffee. Besides, I can’t think of many who say they love having their latte at their local Maccas, yet Maccas sell a crap load of the stuff. It’s all about how we feel internally. In our minds. In our hearts.
And I find that silly as it sounds, we have coffee too, yes, to get our fix, but mostly to fit into society and as a way of connecting with others.
My youngest could not give two hoots about a cup of coffee. My oldest, on the other hand, loves the stuff, along with my wife. Me? Well, I will have it if I feel like it, but it is not a necessity. And as I am a typical Generation X kind of guy, the thought of spending $15 on a couple of coffees daily, together with all those alternative milks with complicated names no one can remember, seems insane, even if I can afford it.
But, at the same time, I did not want to take away their joy of fitting in and connecting with each other, especially us as a family. So, I worked around the problem.
About a year ago, I went out and bought a decent expresso machine. This looked complicated and came with a manual the size of Queensland, but after a couple of weeks, I had mastered it, and the coffee was surprisingly good. And now, daily, the three of us sit outside to connect and talk. It is amazing what your kids will tell you when they are not glued to a phone. Surprisingly, I enjoy making coffee. It has a calming influence.
Do we still go to coffee shops? Of course, we do. Just not as regularly as before. And in the process, we save a decent amount. But the ‘problem’ is sorted.
And that is what I think the issue will be for the young. Because high-income parents solve all their kid’s problems, they assume there is no solution if they try themselves. But there is always a solution. But if you are always solving the issues your children have, they grow up never knowing how to solve a problem.
And if the $1,500 coffee habit has taught me anything, it is that I fear for the next generation of children. Let them break their limbs. Let them make mistakes. Let them have money problems. Because only then will they learn and try to find solutions to a problem rather than just accept what is in front of them. Or wait for mum and dad to sort it for them.
Because not everything is about buying a home, I have been in numerous meetings with young clients and concluded that maybe home ownership is out of their league. And that then leads to a different conversation. If owning a home and building wealth through ownership is not possible, what else is?
And the conclusion may be that they will be renting, but other forms of investments are the route to go, and that may mean they need to control the luxuries of a daily coffee as well as all the other luxury things they “must” have.
I often say if you don’t want to do something, you will come up with a thousand reasons why it cannot be done. If you want to really do something, you only need one reason.
Not buying coffee will not get you more time, more money and more wealth. But expenditure control, understanding and a plan of what is really important to you and your children in life will. And as a minimum that must be the duty of a parent to pass onto a child. If you would like to know more, contact Hitesh at hitesh@medisuccess.com.au or call 07 3161 9548.
