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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.: