How the ‘Emerging Affluent’ Class Is Spending Money With Pandemic End in Sight

How the ‘Emerging Affluent’ Class Is Spending Money With Pandemic End in Sight

Many who make $125,000-plus are concerned about tax increases, rising inflation and retirement
A happy father watches his children

With some Americans' finances improving amid the coronavirus pandemic, certain consumers — particularly those with household incomes of $125,000-plus and investable assets of $100,000-plus — plan to take advantage and increase their spending.

The latest survey from Buffalo, N.Y.-based M&T Bank discovers that 37% of America's emerging affluent class report some, or even significant, improvement in their financial situations. As a result, many of these consumers plan to put more money into new investments and lifestyle upgrades.

Despite economic concerns, ‘emerging affluent’ class investing more in retirement, philanthropy and college planning

M&T Bank's 2021 U.S. Emerging Affluent Survey finds that many respondents share similar concerns about today's economic landscape, including:

  • Tax increases (46%)
  • Rising inflation (41%)
  • How to pay for retirement (35%)
  • Trustworthiness of financial advice (20%)

However, these issues aren't stopping these higher earners from investing in what can matter most. For instance, 44% of respondents are increasing or planning to increase contributions to their savings and investment funds, while 29% are considering early retirement.

The M&T Bank survey also shows that these emerging affluent consumers are giving away more money, with 38% either giving to new charities or legacy charities they've previously donated to.

On the college savings front, the survey reveals that financial planning tactics now include:

  • Investing more to help children prepare (36%)
  • Saving for college over saving for retirement (27%)
  • Considering alternatives other than savings and loans to pay for college (26%)
  • Reevaluating school choices due to the high cost of college (25%)
  • Increasing college savings (20%)

Financial planning may help reduce lifestyle purchase regrets

The survey shows that 55% of respondents plan to make the most of the economy's low interest rates by taking on more debt or refinancing existing debt.

They're eyeing two major areas for their spending — home improvements (33%) and travel (27%) — perhaps driven by the money saved by staying at home during the coronavirus crisis. In fact, another survey from hotel chain Hilton found that travelers saved an additional $2,173, on average, during the health crisis for their post-pandemic vacation budget.

More than 6 in 10 respondents (63%) plan to increase their investments and savings to pay for lifestyle upgrades, including:

  • New real estate
  • Recreational purchases
  • Travel

But because 33% of respondents confessed to having regrets about these types of purchases, that money might have been better spent elsewhere. A recent survey from market researcher Logica shows that many consumers have worked with a financial advisor or planner more often during the pandemic than before it began.

According to M&T Bank's findings, many affluent consumers who work with a financial advisor do so to reach their financial or life goals (67%), or to earn better returns than they could by themselves (50%).

Methodology: M&T Bank and Wilmington Trust commissioned Engine Insights to conduct an online survey between May 26 and June 2, 2021. Respondents consisted of 500 investors between the ages of 35 and 55, with household incomes of $125,000 or more and investable assets of $100,000 or more.