Research by the World Economic Forum (WEF) shows that 78% of millennials prefer spending money on a desirable experience rather than a material possession.
Along similar lines, a Barclays survey reveals that Brits are increasingly prioritising spending on experiences, such as holidays and live events. This type of spending was expected to contribute £134 billion to the UK economy in 2024 when the research was conducted.
This article will examine the reasons behind the growing popularity of experiential spending and what it reveals about the importance of using wealth to deliver real value in your life.
4 factors that help explain the growth in experiential spending
There is no single reason to explain why so many people are now focused on experiential spending, as illustrated by research from the WEF and Barclays.
Instead, there are a range of relevant factors that include:
1.The thrill you enjoy from a tangible item can quickly fade
There is no doubt that buying a new car or the latest gadget can be exciting, especially if it is something you have looked forward to for some time.
However, given how quickly items can become obsolete and new cars can lose their sheen, there is no doubt that the sense of excitement can quickly diminish. Your mind will then turn to your next purchase.
Conversely, memories of events and experiences will linger in your mind, and you will derive ongoing pleasure and positive thoughts from them for as long as you want.
There will be music festivals, sporting events, or family holidays that you will reminisce about for many years, but it is unlikely that you will have the same memories about upgrading your car or iPhone.
2. Experiences can provide you with a valuable sense of wellbeing and happiness
There is a growing recognition of the mental lift you gain from experiences, especially when you share them with friends and family.
Shared enjoyment can significantly enhance your personal happiness and wellbeing.
Even if you have other financial priorities and cannot afford a substantial outlay for a big event, a limited spend on an experience can still give you a lasting boost.
3. The pandemic has driven the desire for shared experiences
Many behavioural experts have noted a change in perceptions of shared experiences and have suggested this may be driven by the Covid pandemic.
After an unprecedented period of almost two years of lockdowns and restrictions on movement and group events, there has been a desire to make up for lost time.
Even though the pent-up demand triggered by the end of the pandemic has now dissipated, there is still a residual desire for shared moments and experiences.
4. Experiences can be seen as social currency
For good or ill, there is no doubt that we are increasingly viewing our lives through the prism of social media.
Because of that, it is easy to see the value of the shareable content that experiences and events can provide you with.
This turns experiences into a form of “social currency” that can help define your identity and provide you with a sense of status and achievement more effectively than a simple consumer purchase.
Experiential spending can provide you with memory dividends
In his 2020 book, Die with Zero, Bill Perkins argued that your goal in life should be to maximise your sense of fulfilment rather than focus solely on wealth accumulation.
While you may resist the suggestion in the title, one concept Perkins developed is worthy of further attention.
He talked of “memory dividends” from money spent on experiences that pay ongoing returns long after the event, in the same way that shares can provide you with regular dividends.
Furthermore, he suggests that, unlike tangible items that depreciate in value, the memories from experiences compound over time and can be relived and cherished for as long as you want.
Every time you recall an experience or share it with someone, you create additional value.
Reviewing your financial priorities
From a financial planning perspective, it is understandable that you may be reluctant to make a big outlay on a once-in-a-lifetime experience.
Instead, you might be entirely focused on setting money aside for your future needs.
Clearly, ensuring your financial security and having sufficient income to maintain a comfortable lifestyle should be a priority.
But, as you may have realised from reading this article, collecting memories from shared experiences can also be an important part of planning your future.
Get in touch
If you would like to talk to us about your financial planning and how to balance securing your financial future with experiential spending, please get in touch.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.