2.6.1 Spending Patterns
Completion requirements
Individual spending is a lifetime pattern of income and consumption from young adulthood to retirement. People rarely change their spending habits, even when their wealth changes.
However, spending patterns also relate to various human ages and stages. By recognizing these patterns, we can visualize a life cycle of spending. We assume, for example, that incomes are spent by parents to support their children, incomes rise gradually as young adults grow older, and incomes decline upon retirement.
Governments give close attention to consumer spending. Consumer spending reflects consumer confidence in the economy. Governments also give close attention to consumer (household) debt. Too much consumer debt makes an economy vulnerable.
However, spending patterns also relate to various human ages and stages. By recognizing these patterns, we can visualize a life cycle of spending. We assume, for example, that incomes are spent by parents to support their children, incomes rise gradually as young adults grow older, and incomes decline upon retirement.
Young people
tend to spend more than their current incomes. They go into debt
buying "big ticket" items - houses, cars, and furniture, for example.
Middle-aged people spend a
smaller portion of their incomes, and save more, than people in other
age groups do. As they pay off their debts, they invest more money to fund
their retirement.
Financial experts suggest investments should make
up for any loss of retirement income, and that the earlier people
invest, the better.
Retired people commonly
experience decreased income. They tend to save the least, and they spend
more conservatively (often on health needs or the needs of other family
members). Many start thinking about estate planning.
Governments give close attention to consumer spending. Consumer spending reflects consumer confidence in the economy. Governments also give close attention to consumer (household) debt. Too much consumer debt makes an economy vulnerable.