Taylor Swift performs on stage for the opening night of “Taylor Swift | The Eras Tour” at State Farm Stadium.
Kevin Mazur | Getty Images Entertainment | Getty Images
Revenge spending is not dead.
Even though Americans owe $1.13 trillion on their credit cards, consumers are still willing to splurge on impulse purchases. This is a phenomenon also known as “catastrophic spending,” or spending money despite economic and geopolitical concerns.
About 38% of adults plan to take on more debt to travel, dine out and attend shows in the coming year, according to a recent Bankrate report.
A quarter, or 27%, of those surveyed said they would go into debt to travel this year, while 14% would dip into the red to dine out and a further 13% would rely on credit to go to the theater, attend a live sports match. event or attend a concert — including the European leg of Taylor Swift’s Eras tour, Bankrate has discovered.
“There is still strong demand for out-of-home entertainment,” said Ted Rossman, senior industry analyst at Bankrate.
“This partly reflects a ‘you only live once’ mentality that has intensified during the pandemic, and partly because many economic indicators – including GDP growth and the unemployment rate – are in favorable shape,” Rossman said.
Young adults, particularly Gen Z and millennials, were more likely to splurge on these discretionary purchases, Bankrate found.
Although the rising cost of living makes life particularly difficult for those just starting out, young adults are taking a more relaxed approach to their long-term financial security, other studies also show.
Rather than cutting spending to increase savings, 73% of Gen Zers ages 18 to 25 said they would rather have a better quality of life than have more money in the bank, according to an Intuit Prosperity Index report.
Gen Z workers also make up the largest cohort of non-savers, according to a separate Bankrate survey.
“It’s difficult to overstate the impact of the pandemic, it has changed the way many people think about their spending and the result is people are more focused on the ‘now’ rather than 40 years from now.” said Matt Schulz, chief credit analyst at LendingTree and author of “Ask Questions, Save Money, Make More.”
But this will have repercussions later, he added.
When it comes to saving for long-term goals, young adults risk losing the considerable advantage of time.
“Every dollar you put aside in your 20s will grow over time,” Rossman said. The earlier you start, the more you will benefit from compound interest, where the money you earn is reinvested and earns even more.
At the very least, find a balance, Rossman advised. Automate some of your income toward savings and build some fun into the budget, he said. “At least you’re not paying 20 percent interest on your credit card.”
Subscribe to CNBC on YouTube.
cnbc
