- Americans are spending more money on experiences that were largely deprived of them during the pandemic.
- WaPo reports that consumer spending on international travel and live entertainment increased by nearly 30% in 2023.
- Meanwhile, the U.S. personal savings rate has declined, dropping to 3.6% in February.
In the early stages of the coronavirus pandemic, many Americans remembered what once brought them joy. They could never stop thinking about the last big trip they took with their family or the last concert they enjoyed with friends.
Four years later, American consumers are mostly out of the pandemic and are spending more on experiences than ever before.
But prioritizing experience has made a huge difference in their financial lives. The U.S. personal savings rate has fallen significantly.
The Washington Post recently reported on how American consumers are embracing a kind of YOLO (“you only live once”) mentality. Consumer spending on international travel and live entertainment will increase by nearly 30% in 2023, the newspaper said.
Spending levels have continued to rise so far in 2024. According to the U.S. Bureau of Economic Analysis, personal consumption spending in February increased by $145.5 billion compared to January, and service spending rose to $111.8 billion.
At the same time, and perhaps predictably, the U.S. personal savings rate declined, the bureau said.
The personal savings rate in February was 3.6%, down from 4.1% the previous month. (This rate was 4% in November last year and 3.9% in December.)
When consumers are free to spend money on their wishlist trips and attend concerts and festivals without onerous health restrictions, they can book flights and hotel rooms. or buying tickets to see their favorite artists.
Therefore, many consumers in recent years have wanted to make up for the time they lost during the pandemic, rather than continue saving money for the future.
“When you go through a crisis, it becomes engraved in your brain,” Ulrike Malmendier, a professor of behavioral finance at the University of California, Berkeley, told the Washington Post. “Official economic reports may say that everything is returning to normal, but we are not the same people we were before the pandemic.”
Malmendier told the Post that many Americans reevaluated their financial habits after the Great Recession. Many consumers started saving more money.
But Americans' anxiety during the pandemic has triggered a different kind of emotion, Malmendier said.
“The negative impact of the coronavirus was not necessarily economic. People quickly went to work and the government stepped in to help,” he told the paper. “Instead, it's about all the things we were starving for: human interaction, socializing, and travel. People are spending money on the things they missed the most.”
