You Don’t Have to Rein In Your Revenge Spending Just Yet: Erin Lowry

Revenge spending (verb): to overindulge after a period of restriction. Sound familiar?

After the great recession of 2007-2009, Americans tended to save on average between 7% and 8% of their income. Then came the global pandemic, and our savings rates soared as we had fewer opportunities to spend. In March 2020, the average personal savings rate hit 13.1%. In April 2020, it was a startling 33.1%. Average personal savings rates have come down, but they consistently stayed above 10% until just a few months ago, dropping to 9.8% in May 2021.

The drop in saving and surge in consumer spending that we’ve seen this summer coincided with the vaccine rollout, economies reopening, and the ability to once again congregate in large groups. One survey found the average American spent $765 more per month in the summer of 2021 compared with 2020. Millennials and Gen Z averaged $1,016 more per month, with the top two categories being dining out and travel.

This was good news for businesses’ bottom line, but all of a sudden the concept of “revenge spending” became a hot topic of conversation. The swarm of personal finance advice to preserve savings and avoid this post-pandemic behavior wasn’t far behind.

I’m not so sure that’s the right advice.

This pandemic has put us through a collective trauma. Lives were and still are being lost, businesses have permanently shuttered, careers were indefinitely disrupted and household dynamics upended. The act of getting through a day in lockdown felt like a success in itself. There has to be a release valve after a drawn-out state of deprivation.