Millennial Consumers' Unusual Spending: Focusing on the Role of Financial Insecurity

Harshly affected by recent economic recessions, young Millennials had been having a hard time finding a job that meets their expectations or an affordable house. Although it seems like Millennials are suffering financial hardship, media often depict them as impulsive shoppers. Taking inspiration from this contradictory aspect of Millennials, this research explores the relationship between Millennials’ subjective evaluation of their financial status and their spending behaviors. In order to achieve this goal, this study first applies a new psychometric scale, called perceived financial insecurity, to measure Millennials’ feelings and thoughts toward their financial status. Second, it examines the psychological antecedents to perceived financial insecurity. Last, the relationship between financial insecurity and spending behaviors in several consumption areas is examined using the framework of compensatory behavior from social psychology.

For the first stage of this research, a perceived financial insecurity scale was developed by conducting literature reviews, in-depth interviews with Millennial consumers, and two online surveys. Consequently, five statements were selected from the initial pool of questionnaire items and used in later stages of this research. Next, another online survey was conducted to empirically test for the impact of six antecedents, namely, perfectionism, self-efficacy, perceived economic mobility, resource scarcity, materialism, and social comparison orientation on perceived financial insecurity. Findings revealed that among the six variables, four (i.e., perfectionism, self-efficacy, perceived economic mobility, and resource scarcity) were found to be the antecedents to financial insecurity. In the final stage, the proposed financial insecurity–compensatory spending model was tested using PLS-SEM. Data used in this stage were self-reported online survey data collected via Prolific. The results showed that financial insecurity directly lessens the amount of dining-out expenditures. However, in four areas of consumption (i.e., fine dining visit frequency, performance visit frequency, short-travel frequency, and long-travel frequency), the indirect path through the increase in dichotomous thinking and impulsivity partially accounted for the relationship between financial insecurity and spending behaviors. Moreover, the relationship between financial insecurity and expenditure amount in the fine dining, short-trip and long-trip areas were fully mediated by dichotomous thinking and impulsivity.

In summary, current research shows that a rational thought process prevails in Millennial decision-making for hospitality and tourism consumption, but an irrational thought process through dichotomous thinking and impulsivity accounts for their decision-making for some consumption behaviors. The findings of this research enhance the understanding on Millennials’ subjective evaluation of their financial status by developing a perceived financial insecurity scale and investigating the antecedents to this variable. Moreover, this dissertation offers practical insights to industry professionals by showing the decision-making mechanism behind Millennials’ spending behaviors in several consumption areas. Industry professionals could formulate more detailed marketing strategies using the findings of this dissertation.