CU Data

Where Will You ‘Spend’ the Holidays?

Your CU is a reassuring source of expertise to help members manage their financial expectations.

December 24, 2013
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My car made an awful noise. The loud, squealing sound prompted a horrendous flashback to “The Ghost of Christmas Past,” namely last December when I faced multiple costly automobile issues that still haunt.

I steeled myself for another horrific bill this year as I parked in the service bay at my friendly dealership. The technician was quite friendly, but not very encouraging as I explained the issue.

I went to work with a grim sense of apprehension.

Hours ticked by. In nervous anticipation, I sat at my desk, awaiting the vehicular verdict.

December, of course, can be an expensive month on its own, with gift giving, holiday parties, snow removal, and the joyful tidings of property tax bills in the mailbox…

Finally, I got the call.

Consumer budgets and expenditures are not static. Emergency savings accounts are very important. Best considered financial plans can go awry. Many external variables—as well as human psychology—come into play.

Research findings this week touch on consumer spending hopes and expectations for the holiday and winter season, plus a look at how mandatory vs. discretionary spending might influence seasonal budgets.

How do all of the pieces come together? Are your members prepared for the unexpected? Are you?

‘A budget tells us what we can’t afford, but it doesn’t keep us from buying it.’–William Feather, American author

Consumers have control over discretionary holiday spending, and interesting research this week reveals trends and considerations regarding seasonal expenditures. A further report provides a psychological explanation of pricing preferences.

Tis the Season to be Fiscally Cautious,” according to Nielsen. “Nielsen expects this holiday shopping season will be marginally stronger than last year, with dollar sales rising about 2%, buoyed by the strongest consumer sentiment in six years.”

Still, many consumers are sensitive to the recession’s impact: 20% indicate there is no cash to spare and 68% “say they still feel like they’re in a recession.”

Nielsen also reports that 30% of shoppers will spend $250 to $500 this holiday season, while 20% will spend $500 to $1,000 and a mere 6% plan to spend more than $1,000. Among the favorite gifts this year: gift cards, toys, technology items, food, and sporting goods.

U.S. Consumer Spending Gains More Over Thanksgiving,” chimes in Gallup. On average, consumers spent $100 per day during the week of Thanksgiving, much more than the average for all of November. This figure is also somewhat higher than Gallup’s findings over the last five Thanksgivings.

“Spending appears to be continuing at a high level through Tuesday of the week after Thanksgiving, suggesting that holiday spending this year may be spread out rather than concentrated on just one day, such as Black Friday.”

“Americans’ predictions of how much they will spend on Christmas gifts is as much an attitude as a factual report,” observes another Gallup resource, “Christmas Spending Further Explained.” 

This is because there is an emotional aspect to holiday shopping that often transcends budgets. “When consumers feel confident about the U.S. economy and comfortable financially, they are more likely to give… a robust holiday spending prediction, perhaps possibly overstating what they will ultimately spend.”

Financial concern, too may temporarily reign in spending until Santa finds himself in a beautifully decorated shopping center.

For another compelling angle on the psychological component of shopping, see “The Psychology of Pricing: Customers Prefer Round Numbers.” 

“The World of Goo,” a puzzle video game, allowed buyers to download the product at a price of their choosing vial PayPal. More than 65,000 people paid between one cent and $150.

The most striking statistic: “57% of consumers picked whole-dollar amounts ending in zero, and an additional 4% chose to pay round, half-dollar amounts. Those percentages are far too high to be random.”

Studies of amounts spent at gas stations and on tipping concur that whole-dollar and half-dollar amounts spent prevail. “Consumers’ preferences for round prices is so strong that they’ll calculate an exact tip amount to arrive at a round total.”

Do you price your products and services accordingly?

Unlimited wants and limited resources

Bills pile up, and not all of them relate to discretionary spend of the holidays. “Need” spending, too, has ebb and flow.

Food Prices Decline but Remain High,” says The World Bank. “Global food prices declined 6% over the last quarter, but are still not far from their historical peaks.”

Plus, “domestic prices showed typically large variations across countries, mainly attributable to seasonal trends but also due to a combination of factors including bad weather, public procurement policies, local supply shortfalls, and currency devaluations.”

Winter utility bills are important budget items for everyone, but particularly so for older and low-income households, AARP reports

“Heating costs continue to be higher for households heating with fuel oil than those heating with natural gas or electricity, but for the first time in years natural gas prices are rising as well.”

Report graphics indicate that natural gas is the primary heating fuel for 53% of consumers aged 65+. Are your senior members prepared for the budgetary heating hit?

Myriad factors affect consumer spending—not the least of which are availability of resources, psychological motivators, and even the weather.

But you can help members prepare for the unexpected by making them aware of the variables over which they do have control, such as discretionary spending, and helping them understand the importance of rainy-day savings funds.

My car repair, fortunately, consisted merely of a minor oil leak that caused a belt to slip. But, the friendly technician also advised a transmission fluid flush to prevent a future mishap.

I am glad I can count on the dealership to keep me well-prepared and my vehicle running. They help me manage my expectations, at least to some degree.

Your credit union, too, is a reassuring source of expertise to help your members manage their financial expectations. Knowing how, why, and where consumers spend will help you help them keep their finances running smoothly.

 

 

 

 

 

Lora Bray is a research librarian at CUNA.

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