47% of American adults have no plans to increase their summer spending

With the onset of spring, warmer temperatures and longer days have many Americans thinking about summer travel and home improvement projects.

After two years with many families staying due to the coronavirus pandemic, many people naturally want to get out this summer to enjoy the travel and entertainment they have been missing sorely.

New consumer spending research by CreditCards.com suggests that may not happen as early as this summer as rising consumer spending and gas prices put pressure on the average American’s finances.

Nearly half (47%) of the adults surveyed said they had no plans to increase their discretionary spending for at least the next six months. Activities that fall under this category include travel, food, outdoor and home entertainment, clothing, electronics, and physical fitness.

Consumer Spending Survey: Key Findings

Notable survey results include:

• Young spenders are less careful: Unlike their Gen X and Boomer counterparts, Gen Z and Millennial respondents reported that they were more likely to increase their summer spending despite concerns about the state of the economy. Gen Z is the most confident group about increasing their summer spending, with 51% of respondents saying they would spend more in at least one category, followed by 46% of millennials.
• Food and drink is not a priority: In all age groups surveyed, spending on rest in restaurants and bars is unlikely to increase. Just 18% of respondents said they plan to spend more on food this summer.
• Sports and entertainment are back: In contrast to spending cuts at restaurants and bars, 57% of high-income respondents and 42% of middle-income households said they plan to spend more on entertainment outside the home, such as concerts, movies, and sporting events.
• Willingness to take on debt rises: 30% of US adults are ready to go into debt for non-essential purchases this spring and summer. Among them, 45% of generation Z, 39% of millennials, 24% of representatives of generation X and 22% of boomers.

The survey of 2466 adults was conducted from 23 to 25 February 2022.

Confidence is mixed when it comes to increasing non-essential spending

American adults are divided when it comes to increasing their discretionary spending this summer. Nearly half (47%) of those surveyed said they had no plans to increase their spending, and that number rises to 65% when only Gen Xers and Boomers are considered.

These results didn’t surprise Geoffrey Zhou, co-founder and CEO of Fig Loans. “Most of our money decisions depend on our emotions, and the pandemic has become very difficult for many people. As more people get vaccinated and restrictions are lifted, people are happy to go out, travel and engage in a host of social activities that they have been denied for the past two years.”

While the gradually opening world may make many want to travel or see their favorite musician in concert, the looming presence of rising inflation and geopolitical uncertainty has many Americans wary of spending big.

According to Zhou, a prudent approach to increasing discretionary spending is prudent. “The pandemic should have taught us that our jobs and businesses can disappear in the blink of an eye and it is important to have funds in case of an emergency. I think it’s a good thing that nearly 50% of American adults are still conservative in their non-discretionary spending.”

Taking on debt comes with risks

Unsurprisingly to most, taking on debt to cover non-essential spring and summer expenses can be a risky choice. In mid-March, the Federal Reserve raised interest rates by 0.25% to curb rising inflation, and it probably won’t be the last hike this year.

While this may not immediately seem like a big increase, it has a direct impact on borrowers as the prime rate increases. For the 30% of Americans who say they are willing to borrow to finance their spring and summer expenses, the extra interest on credit cards and loans can hit the wallet hard.

The discovery worried Dr. Stacey Mastrolia, professor of accounting at Bucknell University. “Perhaps this is the most disturbing result of this study, but unfortunately it is not a surprise. Experian’s 2020 Consumer Debt Report 2019 to 2020 indicates that Generation Z increased their total debt load by 67%, Millennials by 12%, Generation X by 4% and Boomers by 0% over that period. Between 2019 and 2020, the younger generation seems to have become more comfortable with rising debt, a finding that seems to be confirmed in this study as well.”

If you’re planning to increase your spring and summer expenses, make sure you can cover the expenses you plan to charge your credit card. In times of economic uncertainty, it’s a good idea to treat your credit card as an extension of your debit card. Only charge the amount you know you can afford to repay at the end of the billing cycle.

“I would recommend that people try to moderate their spending. If you’re going to build up debt to fund discretionary spending, like using your credit card for shopping, make sure you can afford to pay it off after the fun part, Zhou advised.

Economic uncertainty makes increased discretionary spending risky for many

Despite hopes that this summer will be a time of accelerated economic growth, the poll shows that many Americans who are reluctant to take on debt see discretionary spending as risky.

Our economy has not fully recovered from the Great Recession of 2008-2009. And this is partly due to the uncertainty that we can resume spending. Consumer spending appears to be trending cautiously through the spring and summer for all but the wealthiest Americans.

“With COVID[-19] As the number of cases dropped sharply, conventional wisdom suggested there would be a surge in travel, dining and out-of-home entertainment this spring and summer,” said Ted Rossman, senior industry analyst at CreditCards.com.

“However, this appears to be under threat with inflation at a 40-year high and gas prices setting all-time records. This could be the third summer vacation for many families,” he added.

bottom line

The summer of 2022 was originally expected to be a time for many Americans to relax after the shadow of COVID-19 prevented many from taking vacations, attending concerts or funding home improvement projects.

However, rising interest rates, inflation and an uncertain geopolitical climate have left many cautious about entering the spring/summer season. While this summer will no doubt be more open to public events and travel, it’s important to consider whether these events are worth going into debt for. For many, this may be another summer of savings, not spending.

Methodology

CreditCards.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise noted, are provided by YouGov Plc. The total sample size was 2466 adults. The survey was conducted from 23 to 25 February 2022.