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Opinion
Noah Smith

Skip the Avocado Toast to Save for Retirement

Aging boomers were bailed out by rising stock and housing markets. Millennials can't count on the same break.
It's not a real choice.

It's not a real choice.

Photographer: Astrid Stawiarz/Getty Images

I’ll confess that I once ate a very expensive piece of avocado toast, at a hip coffee shop in Brooklyn, New York. It wasn’t very good, either. So I hear what Australian mega-millionaire Tim Gurner is saying when he accuses members of the millennial generation of wasting money on overpriced avocado toast instead of saving up to buy houses.

To a large extent, Gurner -- a millennial himself -- is just hawking his own product here. As a property tycoon, Gurner makes money when demand for real estate goes up. So unless he plans to diversify into the avocado-toast business, he has an incentive to urge young people to buy more houses. Although money spent on a house may look like savings,  a big chunk of it is actually consumption. Economists have a term for the consumption you get from your domicile -- it’s called housing services. When gross domestic product is calculated, economists add the value of imputed rent, which treats a homeowner as a landlord renting to him/herself. This form of consumption has become a lot more important in economies where home values have risen. For example, here’s imputed rent as a percentage of GDP in the U.S.: