What is Spending Power?

The term spending power can define the power given to a governing body to spend financial resources for the benefit of the state, territory or region. Funds are allocated for different departments and are spent accordingly. The term “spending power” has become more associated with the public’s power to spend wealth on available products and services on the market.

Generally, any citizen who is regularly earning an income can gain some spending power, entitling him to buy anything within his means. Citizens who depend on their family or the government for their financial resources also have purchasing power. Among this dependent demographic, retired citizens age 65 and above may have the least buying power, as compared to teenagers. Teens 13 to 17 years may be partially dependent on their parents for allowances, but they can seek part-time and summer jobs to provide themselves extra spending money.

Marketers and advertisers have constantly looked at consumer trends in order to find out which demographic has the most spending power. The largest demographic tends to possess the most power in purchasing, as seen with US Baby Boomers, those born from 1946 to 1964. The turn of the 21st century saw their rise in the realm of consumer spending power. Aside from being the largest demographic in the US with 78 million in number, they were also the richest, having $2.1 trillion US Dollars (USD) at their disposal.

Soon after the Baby Boomers’ reign, Generation Y took over. Born from 1980 to 2000 from the Baby Boomers themselves, Generation Y was well-provided for, had a higher amount of allowances, and more influence on household purchases. Such was the Generation Y spending power that in a 2006 study, it was reported that this population held 81 percent influence over their family’s choices of clothing and 52 percent on cars. Marketers who primarily targeted parents and the older population began readjusting their methods and targeting the younger population.

Marketers and advertisers alike have shifted their focus to a more younger generation: tweens. From ages 8 to 14, tweens are neither kids nor teenagers, but have gained more spending power. Parents marry later in age and have accumulated a sizable amount of wealth, which they are willing to spend on their kids. Not only do tweens get allowances, but they also voice opinions on some purchasing decisions. Besides spending power, they are also said to have the “pester power,” nagging their parents until they get what they want.