SPENDING VS INVESTING TRADE OFF Why Young Consumers Prefer Lifestyle Over Wealth Creation

Abstract

Background and Rationales: The growth of digital payment infrastructure, social media ecosystems and consumer credit products have changed the financial behavior of young consumers in India. Millennials and generation Z spend a growing amount of disposable income on lifestyle spending, specifically; travel, fashion, dining, digital subscriptions, and entertainment, as they make a consistent under-investment. The lifetime monetary implications of this pattern of behaviour described as a trade-off between current consumption and future wealth generation are profound both to the households and to the levels of national savings. Purpose: This paper investigates the spending- versus-investing trade-off among young Indian consumers age between 18 to 35 years. Precisely, it explores the psychological, social, and structural determinants of the lifestyles expenditure as opposed to investment, measures the trade-off, and also the formulation of three centrally stipulated hypotheses, and the establishment of policy suggestions to beneficially modify the youths financial behavior. Methodology: 120 respondents, who were selected through the structured questionnaire, participated in the study to provide primary data on the subject in urban and semi-urban regions of India. The survey consisted of 36 questions in six areas that included demographic, expenditure habits, investing behaviour, the role of social media and peer pressure, financial literacy and use of credit. Statistical analysis entailed percentage analysis, Pearson correlation, chi-square test, multi-regression analysis and Cronbach Alpha reliability test which were done via SPSS and Microsoft Excel. Important Results: 74.6% of discretionary income is going to the lifestyle segment with only 10.4% being invested in by the young consumers. Halal payment convenience (mean = 4.33) and social media impact (mean = 4.21) are the strongest drivers of life style spending. There is a statistically significant negative relationship found between the lifestyle spending and investment behavior while (r = -0.623, p < 0.01). The level of impact of social media is highly connected with lifestyle expenditure (X2 = 28.47, p < 0.001). Investment behavior is considerably positively correlated with financial literacy ( r = +0.541, p < 0.01). The multiple regression model explains 62.1% of variance in investment behavior (R² = 0.621, F = 31.28, p < 0.001). Conclusions and Implications: The spending-first orientation demonstrates the convergence of the present bias, social comparison pressures, structural spending facilitation and financial knowledge gaps. It has been proposed to include financial literacy in academic programs, use the principles of behavioral nudges design of investment platforms, use social media to conduct financial awareness, and develop investment products that are youth-friendly and related to aspirational consumer psychology.