Background
Our modern society has modern expenses that did not exist previously. Cell phones, Netflix, and Internet access all extract money from our wallets. As many households try to save for retirement and other purchases, is it true that modern tech ate your savings?
Findings
- New tech costs the average household over $4,000/year: Computers, software, and Internet access make up the lion’s share of this amount. Cable TV and streaming media combined average about $1100/year.
- Your mileage will vary – you may spend more than this: These numbers are averages, which include in the calculation households that don’t pay for these services. Also, while cell phone usage and Internet subscription rates are in the 80%- 90% range, we know your household may not be average. If you just added Disney+ as your fifth streaming service…or have three kids with phones…you’re probably paying a lot more than the average.
- Increased tech spend during the pandemic: Computers and streaming media both jumped substantially in 2020. Home offices and quarantine entertainment meant more money spent on these.
Implications
Would you go back to a flip phone to save money? The challenge with new tech is that we are wedded to it. There may though still be room to coach financial services clients to moderate their behavior. With everything moving to a subscription model, it’s easy to forget you are locked in to a lot of expense. An annual review of recurring expenses may be a good start at finding more money to save.
The small print
The numbers for Modern Tech Ate Your Savings came from the BEA. The spending increases are not adjusted for inflation, though inflation was very low during the last year so this doesn’t change the conclusions. I excluded from “new tech” anything that was more traditional. This included televisions, audio equipment, telephones, and even digital downloads. With downloads, I assumed it just replaced old-school VHS and DVD purchases so excluded it from the “new” category.