Pedestrians sit in the outdoor dining section of a restaurant in the SoHo neighborhood of New York, U.S., on Wednesday, May 19, 2021. Photographer: Nina Westervelt/Bloomberg via Getty Images
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As the economy recovers and the market notches new highs, most people are ready to live it up.
Between dining out and taking trips, Americans are now spending an average of $765 more a month compared to last year when much of the country was shut down due to the pandemic, according to the MassMutual Consumer Spending & Saving Index.
Young adults, in particular, are determined to make up for lost time. Millennials and Gen Z, who reported feeling the financial impact from the rise in re-openings and social gatherings, said they are shelling out $1,016 more a month, on average, than they did during summer of 2020. MassMutual polled 1,000 U.S. adults from July 21 to 28.
“Spending that extra money is sometimes making a short-term decision,” said Paul LaPiana, a certified financial planner and senior executive at MassMutual in Park City, Utah.
Younger generations “seem to be rushing to the door to get out and start living their lives again instead of making more disciplined decisions, including putting some away, just because they’ve been missing out for the last year and a half,” he observed.
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Many Americans plan to spend even more in the weeks ahead as schools and offices reopen.
Largely due to commuting costs and new clothes, roughly one-third of office workers are concerned that a return to in-person or hybrid work settings will cause them a financial hit.
Nearly half of parents of children in kindergarten through grade 12 also anticipate spending more this back-to-school season compared to 2020, and almost as many plan to spend more on supplies than they did before the pandemic.
In fact, back-to-school sales in the U.S. are expected to grow 6.7% from 2019 and 5.5% from last year’s Covid days, according to a forecast by Mastercard SpendingPulse.
However, the recent surge in Covid cases fueled by the delta variant could upset these predictions. Already, in-person learning is in jeopardy at some schools, while many offices have delayed their return-to-work plans.
As consumer spending picks up, savings falls.
Nearly half, or 48%, of Americans said they saved less than $500 in the last three months, up from just 36% who said the same in April, MassMutual found.
The personal savings rate — how much people save as a percentage of their disposable income — hit a historic 33% last year but now stands at a bit more than 9%, according to the latest data from the Bureau of Economic Analysis.
No doubt, worries about the delta variant’s surge could cause consumers to reverse course once again. After all, the Centers for Disease Control and Prevention recently called for vaccinated individuals to go back to wearing masks indoors to prevent Covid’s spread.
The new guidance has already prompted consumers to rethink decisions about dining out, traveling and making other purchases.
