Consumers, by and large, will not adjust their spending too much if they were to suddenly receive an unexpected windfall of $500, but would adjust their spending if they suddenly lost that much money unexpectedly, according to a paper published by the National Bureau of Economic Research.
Fewer than one-in-five of the individuals who participated in the survey said they would spend more if they suddenly found $500, while 39% said that amount wasn’t enough to get them to change their spending habits. If the windfall was higher, however, the numbers start changing. For example, if the amount was $2,000 instead of $500, 27% said they would spend more of their money and 39% said the same about a $5,000 windfall.
Those who received the higher amounts did indicated a propensity to spend the money more “soundly,” on items like college tuition or home renovations. Those who received the lower amounts were more likely to spend it on vacations or eating out.
What is interesting is that half of the individuals who said they would not increase their spending if they received $500 did say they would spend less if they lost $500.
For an industry that relies on persuading individuals to repay financial obligations when they may not have enough money to do so, understanding how consumers behave when it comes to money is incredibly important. While this study is incredibly analytical, it does provide important insights into how consumers think and act when it comes to their financial situation.
