In a modern and industrialized economy, as we age we go through very predictable spending stages of life that occur at predictable ages. Why is this important to know when forecasting the economy? Our age and stage of life determine predictable spending patterns. As we move through life, we change our spending in very predictable ways. These predictable spending patterns impact our economy, business and product trends. Everything from the demand for potato chips and real estate to inflation rates, cycles of innovation, economic growth, immigration rates, and domestic migration — locally, nationally and globally are impacted. By analyzing this information we can successfully forecast how spending will change in the years and decades to come.

Chart 1:1 indicates that as we age we usually spend more up until our average peak spending age of 47. Between about 18-47 we go through several stages of life. From just entering the workforce at 18-22 years of age, to getting married between ages 22-30. Children soon follow and we then purchase our first home from about ages 31-42 - the stage at which we incur the most debt – and our spending continues to increase purchasing our next home, more furnishings and cars, etc. until about age 47 as our kids reach their late teenage years and are still living in the household. As we reach 50 and the kids leave home, we begin to spend less, paying down debts, and saving more for retirement. After age 50 we tend to spend less for the rest of ourlives, allowing growth in savings and investments. Income doesn’t decrease, but spending usually does. The peak rate of investment occurs around age 54, as does leisure travel. Investment continues into retirement around age 63 and net worth peaks just after that around age 64. Many aspects of health care spending, like pharmaceuticals, continue to grow until the average age of death, currently 78.

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