Consumers Maximise Budgets to Splurge on Luxuries

Published 26 November 2023

Author

2 min read

Looking for ways to maximise their money, consumers are balancing saving with splurging on restaurants and travel. New financial management apps use artificial intelligence (AI)-generated features that help people adopt – and stick to – frugal behaviours.

Key Stats

40%	In the US, 40% of consumers say they intend to splurge in the coming months
37%	In Europe, 37% of consumers plan to splurge in the coming months
79%	Among Americans, 79% are trading down (buying comparable products from a more affordable brand) to save money when they shop
28%	In the US, 28% of consumers have reduced their food spending in an effort to save money
40%	Two-fifths of Americans intending to splurge in 2023 aim to treat themselves by dining out
1/5	In China, a fifth of consumers are switching to cheaper brands because of the economic downturn
50%	About half of Chinese consumers buy from channels that offer discounted premium brand items

Trade Down to Trade Up: As the cost of living continues to rise, today’s consumers want to make their money work harder. In the US, 79% of shoppers are trading down (buying comparable products from a more affordable brand) to save cash (McKinsey, 2023). And in China, one fifth of consumers are switching to budget-friendly brands (McKinsey, 2023).

But these ‘savings’ aren’t staying in the bank: 37% of Europeans and 40% of Americans plan to use the money they’ve saved to spend on restaurants and travel (McKinsey, 2023). This intent is especially pronounced among Gen Zers and millennials, who are splurging on experiences, travel and fashion. See The Brief for more on young people’s luxury spending priorities.
Money Management, Upgraded: New financial management apps aim to help consumers upgrade the efficacy of their budgets. London fintech service Wagestream addresses the financial wellness of frontline and shift workers by giving them earlier paydays and access to a financial coach through a chat function.

Meanwhile, AI-fuelled apps automate personal money management. New York-based AI budgeting app Cleo uses “tough love” and humour to playfully shame users when they spend excessively and offers praise when they meet their financial goals. Cleo’s Haggle It feature uses AI to help customers draft letters to negotiate rent, credit card fees or interest rates. Elsewhere, DeepMind (Google’s AI arm) is reportedly testing an AI life coach that can perform 21 types of personal and professional tasks, which includes budgeting.

For more, see Financial Wellness for the Inflation Era.

Trade Down to Trade Up: As the cost of living continues to rise, today’s consumers want to make their money work harder. In the US, 79% of shoppers are trading down (buying comparable products from a more affordable brand) to save cash (McKinsey, 2023). And in China, one fifth of consumers are switching to budget-friendly brands (McKinsey, 2023).

But these ‘savings’ aren’t staying in the bank: 37% of Europeans and 40% of Americans plan to use the money they’ve saved to spend on restaurants and travel (McKinsey, 2023). This intent is especially pronounced among Gen Zers and millennials, who are splurging on experiences, travel and fashion. See The Brief for more on young people’s luxury spending priorities.
Money Management, Upgraded: New financial management apps aim to help consumers upgrade the efficacy of their budgets. London fintech service Wagestream addresses the financial wellness of frontline and shift workers by giving them earlier paydays and access to a financial coach through a chat function.

Meanwhile, AI-fuelled apps automate personal money management. New York-based AI budgeting app Cleo uses “tough love” and humour to playfully shame users when they spend excessively and offers praise when they meet their financial goals. Cleo’s Haggle It feature uses AI to help customers draft letters to negotiate rent, credit card fees or interest rates. Elsewhere, DeepMind (Google’s AI arm) is reportedly testing an AI life coach that can perform 21 types of personal and professional tasks, which includes budgeting.

For more, see Financial Wellness for the Inflation Era.