People Don’t Necessarily Spend Less as They Age

It’s conventional wisdom that as people age, they spend less. The impression has been formed by charts like the one below based on data from the Bureau of Labor Statistics. The chart presents average household spending for various age groups in 2015.

Household spending generally rises through one’s early 50’s, and then steadily declines. This is just one of the factors that has led Marketers to focus on younger customers whose spending is still on the rise.

Unfortunately, charts like this can lead strategists and marketers to the wrong conclusions.

Older households tend to have fewer people in them. So, while overall household spending declines, spending per household member increases. You might be thinking this is simply because the fixed costs of running the household (things like the mortgage payment) are spread over fewer people. So, the spending just looks like it's going up.

That does account for some of the effect, but not all of it.

The chart to the right displays 2015 spending per household member excluding social security and pension contributions as well as housing and healthcare expense.

Note how spending jumps at the 45-54 year-old cohort, rises slightly from there, and then falls off for those 75 and over. This doesn't look anything like the chart above.

Generally, speaking these two charts highlight differences in the spending patterns of households with children and those without. When children leave home, naturally, most of the expenses go with them. Not all of that potential savings goes back into their parents' bank account. They spend some of it on themselves.

Take a look at the chart below, which displays how much households spent in 2015 on entertainment; things like movie admissions, A/V equipment, pets, etc..

Like the chart above, spending increases up to the 75+ cohort. But the rise in spending is much steeper. Spending per household member was 70% more in the 65 - 75 households than it was in households spanning 25 - 44 years.

While the differences in spending levels vary, this pattern holds true for categories like food at home, dining out, and new car purchases.

It doesn't hold true for all categories. Apparel is a notable example. So, like all consumer analysis, you need to study this in the context of your own company and industry.

It's interesting to note that the amount spent on one category rose steadily through all age cohorts: Cash Contributions. This is the term the Bureau of Labor Statistics uses to describe giving money away. It's also a good indication that older households have spare change to spend. I'll discuss that in another blog post.

Note: The Bureau of Labor Statistics includes social security tax and pension contributions in its calculations of household spending. I removed them from the second chart because I doubt most people realize those expenditures are in there in the first place.