The pandemic, global unrest, and shifting economic uncertainty have influenced a generation’s spending and saving habits.
Key Details
- During the pandemic, Americans alternated between saving and wild spending sprees. While lockdowns prevented spending on partying, food, and entertainment, there were other ways to spend.
- Gen Z and millennials have been especially influenced financially by the last several years of uncertainty, leading to erratic spending behaviors.
- For some, lockdowns forced them to save, but for others, the stressful environment prompted more online spending than ever.
- Experts predict that the events of the last several years could forever influence the financial habits of the younger generation, Business Insider reports.
Why it’s news
Consumer spending has started to resemble compulsive shopping after the pandemic. During times of high stress, people often turn to something that feels like control—for many, that was shopping. Now that the pandemic has ended, that tendency to shop compulsively may not go away. While retailers may benefit from the increased number of shoppers, consumers face a new reality—growing debts.
Americans, particularly younger ones, face growing debt levels as the cost of living rises. At the same time, layoffs are spreading from the tech sector, and the labor market is slowing down.
Millennials’ debt increased by 27% from 2019 to 2022, according to the Federal Reserve of New York. At the same time, younger consumers are accruing debt. Around 2% of debt held by 18 to 29-year-olds is delinquent—or more than 90 days past due, Business Insider reports.
In addition to credit-card debts from shopping and paying higher bills, younger consumers are also likely dealing with crushing student loan debts.
However, some did learn from the pandemic rather than taking on more debt. Government stimulus and slowed spending in many sectors led to generally higher savings for most Americans. From the first quarter of 2020 through the third quarter of 2021, Americans accrued around $2.3 trillion in savings, Business Insider reports.
Some have taken the opportunity to strengthen their savings account. While this may have created new lifelong savers, those who responded to the pandemic by increasing their savings and cutting expenses may have already been at higher income levels. While the pandemic caused Gen Z and millennials to use their savings to survive, the top quartile of earners added $1.5 trillion to their savings during the pandemic, Business Insider reports.
Backing up a bit
Despite high inflation, spending jumped at the beginning of this year, but that shopping spree seems to be declining. Retail spending dropped 0.4% in February, according to a Commerce Department report.
The decline follows a January shopping spree that surprised economists and shifted the Federal Reserve’s plans for reducing inflation. Spending in department stores saw the most significant decline with overall outlays declining 4%. Customers purchased 2.2% less at restaurants and bars and 2% less on vehicles.
Spending on home improvement and gardening supplies, clothing, and furniture also fell.
While inflation has declined somewhat, prices are still around 6% higher than a year before, NPR reports.
Though retail purchasing declined overall, money directed to groceries rose 0.6% and online shopping increased 1.6%. Retail spending remains 5.4% higher than in February last year.
