Money blog: 'Doom spending' on the rise (2024)

Whether it's global warming, an impending economic disaster or the idea of never owning a home, young people are worrying about the future - and are "doom spending" to cope.

If you haven't heard of the term, here's a quick explanation:

Doom spending is basically spending money on short term, instant enjoyment, rather than saving it for the future, to cope with economic stress and worries.

It could be described as Gen Z's version of retail therapy.

To demonstrate that, here's a TikTok as an example...

A recent study by Credit Karma found 43% of millennials and 35% of Gen Zs doom spend to make themselves feel better.

Fuelled by social media, the trend has almost become the norm, with many young people taking to TikTok to complain about the state of their financial futures.

One viral video created by Maria Melchor, also known as @firstgenliving, has been viewed more than 1.7 million times.

In the clip, she says: "We can't afford anything else. Homeownership or starting a family is so out of reach that we are using that down payment or kid money on whatever it is that we can afford that will bring us the semblance of the kind of adulthood we were promised."

Thousands of videos have been posted online, with people sharing their experiences of doom spending, advising others how to avoid it, or branding the idea as stupid.

Louise Hill, the chief executive and co-founder of Go Henry, said young people were often influenced to buy things they don't need as they're continually exposed to new products online.

She pointed out the #TikTokMadeMeBuyIt trend, where users show off recent items they have bought online, as an example.

More than 8.4 million videos using the hashtag have been posted on TikTok.

"A lack of financial education can heighten this behaviour, as people lack key money management skills and the ability to differentiate between their needs and wants," Ms Hill told the Money team.

"For young people, the ongoing cost of living crisis, student loan debt, and feeling like they won't ever be able to afford milestone purchases like a house can push them towards doom spending.

"Social media can pile on the purchase pressure too, especially if they see influencers or friends showcasing their latest buys online."

While doom spending might seem like a harmless habit, it can lead to a cycle of struggling to save and financial trouble if people start borrowing money to pay for it.

Ms Hill warned the situation can become more "difficult" if people turn to buy now, pay later plans to fund it.

"Spending excessively now could also make it hard to save up for those important milestone purchases. Understanding the difference between needs and wants is crucial, as it helps prioritise spending on essential items and reduces unnecessary expenses," she said.

She advised people to create a savings goal and work towards it when they want to buy something new, instead of purchasing it straight away.

"By the time you've saved enough for it, think about whether you still really want it. This is a good way to practice mindful spending and move away from always seeking instant gratification.

"All kids and teens need to understand how money and spending is linked to their self-esteem. You can't buy a lifestyle, and you won't feel better about the future by spending too much now.

"With small steps like these, young people will have the confidence to save for a range of goals, say no to peer pressure, and find better ways to cope when they feel down."

For Savings Guide this week, Savings Championco-founder Anna Bowes looks at the best fixed rate bonds and ISAs.

The base rate cut that we've been expecting has finally happened, great news for borrowers, but not for savers.

And unfortunately, some providers have been lightning fast with cutting their rates.

Although those with one-year accounts maturing at the moment may find that the rates they can achieve now have fallen a little from a high point 12 months ago, the top fixed-term bond and ISA rates have been pretty stable for a few months now, whilst the market paused waiting for the base rate cut.

However, they are now starting to fall again!

You'd expect to see this with variable rate accounts, but even new issues of fixed-term accounts, which should have already anticipated a base rate cut and be priced accordingly, are falling too.

As more cuts are expected, both to the Bank of England base rate and therefore bank and building societies account rates, now really is the time to lock away some of your cash if you can, even in the lower paying longer-term accounts.

This could help protect against more cuts – helping your cash earn more for longer.

A new traffic light-style rating system for workplace pension schemes is set to be introduced.

The aim would be to reduce the number of savers sitting in poor-value pensions, as schemes would be publicly rated red, amber or green.

The Financial Conduct Authority, the Department for Work and Pensions and the Pensions Regulator aim to put the joint framework in place for workplace defined contribution schemes.

Under the plans, schemes will be compared on public metrics that demonstrate value - not just costs and charges, but also investment performance, and service quality.

Poor performing schemes would have to improve or ultimately protect savers by transferring them to better schemes.

Sixteen million people save for their retirement into defined contribution pension schemes.

Wall Street's "fear gauge" (proper name: the Chicago Board Options Exchange Volatility Index) has dropped by about 20% today - indicating markets are starting to feel more stable.

VIX surged by as much as 181% on Monday but on Tuesday it recorded a drop of 28% as stock markets rallied around the world.

Global shares have risen after a Bank of Japan official suggested the central bank would refrain from raising interest rates amid an unstable time in the market.

VIX is Wall Street's most-watched gauge of investor anxiety.

Airbnb shares slumped nearly 15% today, with the company citing slowing demand in the US and shorter booking windows among the reasons.

The San Francisco-based company reported a 14.9% drop in profit for the second quarter compared with last year, despite an increase in bookings and revenue.

The company has warned it is experiencing a shorter booking lead time globally which refers to the number of days between the reservation date and actual arrival.

A shorter booking window can indicate travellers are booking travel at the last minute due to increased uncertainty and caution in spending.

There have also been signs that domestic travel in the US has slowed since the start of the year.

Airbnb chief financial officer Elinor Mertz said yesterdaythat softness in long booking lead times was a big factor in its forecast.

By Sarah Taaffe-Maguire, business reporter

The stock market panic of Monday may soon be in the rearview mirror as the worst-hit companies rebounded on Wednesday morning trading in the US.

The tech companies that suffered the most from the recent sell-off returned to the high values before fears over the US economy triggered the sales.

AI microchip maker Nvidia climbed 3.8% while Instagram and WhatsApp owner Meta and Amazon held on to most gains of the morning trades.

These highly valuable companies - worth more than $1trn - are part of the indexes that observers use to assess the health of the stock market.

While other tech giants like Apple and Google owner Alphabet saw a rise in their share price today, the numbers still aren't at the pre-Monday sell-off level yet.

As a result of these firms' share price growth, the tech-heavy NASDAQ was up more than 1%, as was the S&P 500 (containing companies relied on to be stable and profitable).

Up 0.75% was the Dow Jones Industrial Average (DJIA) index of 30 major companies listed on US stock exchanges.

In the UK the benchmark index - the FTSE (Financial Times Stock Exchange) 100 - rose 1.75% on the close. The larger FTSE 250 with more UK-based constituent companies ended the day up 1.02%.

Barclays is making cuts to a selection of products across its residential purchase, remortgage and reward ranges from tomorrow.

The most notable rate change will be the bank's five-year fixed rate for home buyers with a 60% loan to value (LTV) ratio and a £899 product fee, which has been reduced to 3.84%.

The previous rate on the product was 4.04%.

Meanwhile, its 4.61% two-year fixed rate, will decrease to 4.43%.

The Bank of England base rate was cut last week from 5.25% to 5%, but lenders had already been slashing rates in the weeks leading up to the move.

Stephen Perkins, managing directorat Yellow Brick Mortgages, told Newspage that more lenders going sub 4% was "greatly welcomed".

"Barclays have made a real statement of intent here. It's game on in the mortgage market now," he said.

Meanwhile, Riz Malik, directorat R3 Mortgages, told the news outlet that the "post-base rate cut bonanza from Barclays will help drive confidence among borrowers and in the UK housing market".

The start of the week was rocked by turbulence on the global markets over fears that the US was heading for recession - but they have now rebounded slightly.

Trillions were wiped off US markets after figures showed fewer American jobs were created last month than Wall Street had predicted, combined with concerns the Federal Reserve had kept interest rates high for too long.

Now the US looks likely to avoid recession, according to bond giant PIMCO, which manages $1.9trn in assets.

Daniel Ivascyn, group chief investment officer, said the US was still on track for a soft landing - shifting to lower growth or flatlining without entering a recession - despite the probability of a recession increasing on Monday.

"We do think the market has probably gotten a little bit ahead of itself in terms of pricing in central bank cuts," Mr Ivascyn said.

"Barring some major geopolitical shock or some major issue with market functioning, central banks, the Fed in particular, will likely cut by 25 basis points in September and future meetings will be live."

The US fiscal picture is "dire" at the moment, but it remains manageable, Mr Ivascyn said.

Halifax predicts house prices will increase for the rest of the year.

Lower mortgage rates and potential base rate reductions will push up asking prices, said the bank's head of mortgages, Amanda Bryden.

The average price rose by £2,200 from June to July, Halifax found, following three relatively flat months and putting the average house at £291,268.

"Last week's Bank of England base rate cut, which follows recent reductions in mortgage rates, is encouraging for those looking to remortgage, purchase a first home or move along the housing ladder," said Ms Bryden.

Rates were lowered from 5.25% to 5% on Thursday - the first cut in more than four years.

"Against the backdrop of lower mortgage rates and potential further base rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year," Ms Bryden said.

Holly Tomlinson, a financial planner at wealth manager Quilter, said she expected the autumn to be a busier period for the market, as indecisive sellers are encouraged by the direction in which rates are going.

Purplebricks chief executive Sam Mitchell agreed: "With lenders already slashing mortgage rates in response to last week’s decision, buyers are beginning to move ahead with purchasing decisions they have been putting off for months."

A supermarket cafe is giving away free crumpets - if you know the password.

Ask for "Ellen" at a Morrisons Cafe and you can get a free portion of Warburtons crumpets with a choice of six toppings.

The offer, named after Warburton's founder, Ellen Warburton, is available until 25 August or while stock lasts.

How to get your free crumpets

Just ask for "Ellen" at the till, and you'll receive two crumpets with either honey, banana, chocolate spread, jam and butter, marmalade, or maple-flavoured syrup.

Vegan spread is available on request, according to Warburtons, which has teamed up with Morrisons over the summer holidays.

There is no minimum spend and the freebie is available in all cafes - but customers can only get one portion per person each day.

Morrisons told Money Saving Expert that there are 100,000 portions available - which cost 99p before they were removed from its cafe menus.