Younger millionaires are feeling the brunt of higher inflation and have temporarily shelved plans to buy homes and cars.
CNBC’s Millionaire Survey shows that almost half of millennial millionaires have delayed buying cars, while 44% have put off the purchase of a home due to higher interest rates that have raised the cost of borrowing.
The survey, whose respondents have investable assets of $1 million or more, suggests that the effects of higher inflation are working their way up the wealth ladder to the highest echelons of society. Typically, inflation always impacts lower-income and middle class households the most, but younger, more affluent members of society are now also feeling the brunt when it comes to big ticket items.
“The millennial millionaires are clearly dealing with something they’ve never experienced,” said George Walper, president of Spectrem Group.
The Federal Reserve has raised interest rates to try and curb runaway inflation and that has two effects on affluent individuals. First, it increases the cost of luxuries such as dining out, plane tickets, hotels and some monthly subscriptions. The survey found that 39% of millennial millionaires have cut back on dining out due to the higher costs. Moreover, 36% have canceled vacations, and 22% are driving less than before.
Second, higher interest jacks up the cost of borrowing, especially to buy homes and cars. The central bank on Wednesday raised its benchmark rate to a range of 1.5%-1.75% and said another hike could come in July.
Nonetheless, the survey found millennial millionaires are more optimistic than most about the economy in the short-term. More than 70% of such respondents said they believe the economy will be in stronger shape come the end of the year, compared to two-thirds of their baby boomer counterparts, who believe it will be “much weaker” by that time.