Ever wondered how you would choose to spend an unexpected windfall? Curious to learn more about Americans’ spending priorities, ValueInsured posted the question in the latest Q4 Modern Homebuyer Survey.
We considered several criteria when staging the hypothetical scenario. First, we wanted the scenario to be relatable to most Americans’ everyday life and not too far-fetched – it shouldn’t be in Powerball territory. Then, we asked Americans how they would spend the money, taking into account their current financial situation and needs. Finally, assuming in reality, most people would elect to allocate the money to more than one expense item, each respondent was given the option to provide up to three answers.
When asked how they would spend an unexpected tax-free cash prize of $25,000, nearly 1 in 3 Americans (32%) said they would spend it toward the purchase of their next home; interestingly, this includes 36% of millennial homeowners and 37% of Gen-X homeowners who already own a home, who say they would choose to spend the unexpected gain toward another home purchase.
Here are the top 10 ways Americans choose to spend an unexpected $25,000 prize:
32% purchase of next home
26% emergency fund
23% retirement savings
17% pay credit-card debt
17% pay non credit-card, non student-loan debts
10% pay home mortgage
9% home renovation/improvement
9% a dream vacation
8% a “splurge” purchase e.g., a car, boat or jewelry
7% college savings for child(ren) or grandchild(ren)
Top 10 ways millennials choose to spend an unexpected $25,000 prize:
33% purchase of next home
24% pay non credit-card, non student-loan debts
23% emergency fund
16% pay student-loan debt
15% pay credit-card debt
15% invest in a business
12% retirement savings
12% pay home mortgage
11% college savings for child(ren)
9% a “splurge” purchase e.g., a car, boat or jewelry
The survey findings indicate several generational distinctions. Millennials have nearly half the propensity as Americans as a whole to prioritize allocating the unexpected cash to retirement savings. It is possible millennials who responded to our survey already felt their retirement savings were adequately funded; it is more likely that they consider retirement a less immediate need due to their age. Paying student-loan debt is the number-four most popular way to use the unexpected $25,000 among millennials, whereas it does not land on the top-10 list for all Americans. Interestingly, possibly because of their own struggle with paying off student-loan debt, more millennials say they would spend the unexpected cash in college savings for their children. Another result that caught our eyes was millennials’ entrepreneurialism: over 1 in 7 (15%) reported they would spend the $25,000 to invest in a business or in their own business, an expense allocation that did not crack the top-10 list for all Americans.