NetSpend has produced a new National Spending & Savings Index finding that even though the economy is showing early signs of a turnaround, low-to-moderate-income consumers are still closely watching what they spend on goods and services and spending more this year on groceries, travel/entertainment and utilities.
The monthly index tracks year-over-year spending trends of these consumers in eight “lifestyle” categories, including “Home,” “Food,” “Personal and Professional Services,” “Travel/Entertainment,” “Finance,” “Utilities,” “Groceries” and “Auto/Gas/Transportation” expenses. Each lifestyle category is composed of smaller subcategories (e.g. “book stores”), which track spending at the merchant level.
The NetSpend National Spending & Savings Index also surveys the average balances in cardholders’ NetSpend Savings Accounts during the same time period. Combined, the spending and savings trends are indicators of changes in consumer habits and are based on aggregated cardholder data from almost 900,000 NetSpend cardholders around the country. As a leading provider of prepaid debit cards, NetSpend is able to provide unique insights into the spending habits of low- to moderate-income (LMI) consumers - those between the ages of 30 and 50 with an average annual household income between $25,000 and $40,000.
National spending trends saw the largest gains in the “Groceries” (+7.75%), “Travel/Entertainment” (+6.91%) and “Personal and Professional Services” (+9.67%) categories. This demonstrates that people are eating at home more often instead of going out, as evidenced by a 1.5 percent decrease in the “Food” (dining out) category. Even the increases in the “Travel/Entertainment” and personal categories are modest, suggesting that people may simply be treating themselves after a year of recession and reduced spending. Lifestyle categories with the largest declines include “Home” (-3.12%) and “Finance” (-4.64%). These declines reflect efforts to minimize unnecessary expenses. In particular, researchers saw a significant decrease in ATM withdrawals as consumers find ways to obtain cash at a lower cost.
Savings trends for the low- to moderate-income consumer across the nation are mixed, but encouraging. The data shows that the average balance of NetSpend Savings Accounts fell slightly from an average of $24.09 in September 2008 to $23.22 in September 2009. While this decrease is insignificant, researchers say they did see a significant increase in the number of savings accounts opened, indicating people are still worried about their money and are looking for ways to save more and earn interest on their money.
“Nationwide, low- to moderate-income consumers are still concerned about the economy and trying to cut costs where they can,” said Dan Henry, chief executive officer of NetSpend. ”Even spending increases have been modest as people put off home-related purchases and opt to cook at home rather than dine at a restaurant.”