U.S. Consumers Spending Less, Saving and Investing More

As more Americans get vaccinated and pandemic restrictions are lifted across the U.S., consumers remain cautious about their money.

The Conference Board, a nonprofit business membership and research organization, reveals in its U.S. Consumer Dynamics Report: Q1 2021 conducted in February 2021 that 62% of respondents were scaling back on expenses, a 13-point increase from the first quarter in 2020.

And as those consumers cut back on spending, they’re saving and investing more, the survey finds.

Where consumers have decreased — and increased — their discretionary spending

More than 3 in 5 U.S. consumers say they’ve cut back on expenses, but here’s a closer look at some of the categories — and by how much.

• Home improvements and decorating: 21% of consumers reported spending on this in the first quarter of 2021, down three percentage points from the fourth quarter of 2020. Spending here had surged early in the coronavirus pandemic.
• Entertainment outside of the home: 13% reported spending on this, down eight percentage points from last year’s first quarter.
• Gadgets: 13% reported spending on this, down seven percentage points from the first quarter in 2020.

As for where discretionary spending has increased:

• Travel: 25% reported travel-related spending on holidays and vacation, up one percentage point from last quarter but down six percentage points from early 2020.
• Essentials: 55% reported spending on groceries, routine transportation, housing, education, health care and medical-related expenses, up five percentage points from last quarter.

Consumer interest in saving and investing grows

While American consumers scaled back on spending in many cases, they bumped up their investing. In fact, nearly 1 in 5 respondents (17%) put discretionary income into mutual funds or stocks.

Meanwhile, more than 4 in 10 consumers (44%) put more money into savings, up three percentage points from 41% a year prior. Americans allocate 9% of their household budgets on saving and investing, up two percentage points from a year prior.

In part due to the economic impact payments — also known as stimulus checks — consumers were more eager about paying off credit cards and other forms of debt. In the first quarter, nearly 1 in 4 consumers (24%) spent discretionary income on paying off debt, down seven percentage points from a year ago.

Having no extra cash to spend could lead to further debt

One reason why consumers are spending less is they have no extra cash to spend, the survey reveals. Nearly 1 in 5 respondents (17%) express this, versus 15% a year ago and 10% last quarter.

Cash-strapped people could fall in danger of racking up credit card debt. To monitor your credit, order a free credit report to look for errors or inaccuracies. If you spot an error on your credit file, file a dispute with the credit bureau from which the report stemmed. Be sure to keep tabs on your credit score, too. There are various free credit-monitoring tools and platforms at your disposal.

No matter how much credit card debt you’re carrying, prioritize making the minimum payments and pay your bills on time. Since your payment history makes up 35% of your credit score, you’ll want to stay on top of your payments.