How Americans spend their money depends on a couple of main factors. First, it of course depends on their income and how much money they have. Second, it depends on their educational level. While you might believe that people who hold a higher education degree will spend more money because they have higher-paying jobs, that isn’t necessarily true.
What factors you need to consider is what people are spending their money on and not merely how much money they are spending. For instance, are people who have a bachelor’s degree more likely to spend money on clothing and alcohol compared to people with a master’s degree? Read our list below to find out.
A Study Completed By Visual Capitalist
A media company, Visual Capitalist, researched how Americans spend their money based on their educational level. They compiled statistics from the Bureau of Labor Statistics and decided to separate the statistics into four groups.
The first group is defined as people who achieved a master’s, professional, or doctorate. The next three groups include bachelor’s and master’s degrees, a high school degree, and less than a high school degree. Throughout the study, Visual Capitalist looked at the participant’s yearly income, how much they spend annually, and how they spend the money.
The average household income on less than a high school diploma is around $17,979. These people typically spend 98% of their annual income. They make about $7,503 from social security. Primary household members with a high school diploma receive about $29,330 annually, spending about 87% of their income. When it comes to social security, they receive about $9,008.
The primary household member with a bachelor’s degree brings home around $81,629 annually and about $11,000 in social security. They spend about 68% of their annual income. Someone with a master’s or doctorate makes around $116,018 every year. They bring close to $17,000 in social security. They spend about 62% of their yearly income.
No matter what educational level someone holds, most people spend the majority of their income on housing, whether they are paying off a loan or renting. A little over 98% of people who hold less than a high school diploma spend 23.5% of their income on housing. High school graduates spend 21.7% of their money on housing.
When it comes to people who have a bachelor’s degree, 68.6% of them spend a little over 22% of their annual income on housing. People who have a master’s degree or higher spend 23.2% of their money on housing.
While all four groups are similar when it comes to where most of their annual income goes, this begins to change further into the study. According to the study, people who have less than a high school diploma tend to spend more money on food than any other group.
People in the lowest income group spent 12.3% of their nearly $18,000 annual income on food. This means they spend a little over $2,000 on food. Of course, this doesn’t seem like a lot to other people as higher-income families spend more than this amount on food every year.
According to the study, the only educational level that spends a large amount of their yearly income on groceries are people who didn’t graduate from high school. However, many people feel this doesn’t accurately depict how much the group spends on groceries because most families receive government assistance.
Most lower-income families receive food at food pantries or receive EBT, previously known as food stamps. While the families don’t need to record the amount of EBT they receive or classify it as income, some people feel they should consider this for the study as it is money the family receives for food. However, because EBT is not technically income, the study didn’t include the assistance.
It’s no surprise the household expenses are on the top of the list, but this isn’t the same for each group. The lowest educational level doesn’t generally spend much money on household expenses as they tend to spend it on food for home instead. While the high school diploma group doesn’t spend as much of their income on food, household expenses didn’t make the top of their expense list either.
When it comes to households that have at least one bachelor’s degree, they spend a little over 7% of their income on household expenses. When it comes to the highest educated level, they spend a little over 8% of their income on household expenses.
It seems that we need insurance for everything. Whether you rent an apartment, own a home, or have a vehicle, you need to look at the insurance cost. Of course, there are also other insurance forms, such as life insurance, to consider as well. While three out of the four groups gave a good amount of their income to insurance, the study doesn’t specify what type of insurance.
About 98% of people who have less than a high school education spend about 8% of their yearly income on insurance. People who have at least a high school diploma spend about 10% of their income on insurance. The next education level of at least one bachelor’s degree spends close to 8% on insurance. However, the highest level spends a little over 7% of their income on insurance.
By looking at the study results, you can assume that some of the insurance people purchase includes car insurance because a couple of the groups spend just as much on gas as they do insurance. About 7.2% of income for the highest educational level goes to gas. Households who hold at least one bachelor’s degree spend close to 9% in gas.
When it comes to the two lowest educational levels, 10% of the income for people who have a high school diploma goes to gas. The lowest educational level spends around 8.2% of their income on gas. Of course, the study doesn’t specify what the gas goes for, which means it can go to vehicles, paying for gas as part of a carpool, or to keep their house warm.
Some Groups Included Additional Income Like Dividends And Property
Every educational level looks at ways to invest their money. People know that the more money they can invest, the more money they can claim as income throughout the year. The biggest problem is, especially for the lowest educational level, is that they need to spend 98% of their annual income on housing, household expenses, food, and other necessities in order to live comfortably.
Because of this, they can’t put as much money into investing in stocks and bonds to receive dividends as the higher educational levels can. In fact, the lowest level spends about $500 of their income on property and dividends, whereas the highest educational levels spend $5,657 on estate and dividends. This is around 30% of what most households with less than a high school diploma make a year.
Higher Education Levels Spend More Money On Education
It is no surprise that higher educational levels spend more money on education than the lower income levels. College is expensive, and unless most lower-income brackets receive financial aid, they are unable to pay for college. In fact, some people who are in the lower educational levels still can’t pay for college because they don’t get enough financial aid. When it comes to education, a little under $300 is spent by the lower educational level.
The highest educational level spends over $4,000 on education every year. However, it is always possible that parents make too much money for their children to receive financial aid for college. While this doesn’t seem to be a consideration for the study, it is common knowledge that financial assistance is only issued to students who show they need financial aid for college.
Everyone enjoys eating out, but the people in the higher educational bracket spend about $4,000 more than the lowest educational level when it comes to eating outside of the home. While there is no information on where the level eats out, this is a drastic difference – especially when the lowest groups spend 12% of their annual income eating at home.
While there is nothing wrong with eating out, it is necessary to mention that people tend to eat out more when they have the money to do so. When you make over $100,000 a year compared to $30,000, one group can easily spend more on eating out than another group. When it comes to the highest educational level, they spend just as much eating out as they do eating at home with $5,759 pay food for the home and $5,182 eating out. Every educational level spent over $1,000 eating out.
No matter what educational level you are a part of, health insurance is something that you need. In fact, the federal government penalizes many people every year for not having health insurance. One of the most significant factors to keep in mind in many jobs will pay for a portion or all of your health insurance – at least for their employees.
While the study doesn’t give out the details of whether the individual receives health insurance through their work or not, we know that the lowest educational level spends about $1,777 every year in health insurance. This amount goes up for the next level, reaching $2,510. Households with at least one bachelor’s degree spend nearly $4,000 in health insurance, whereas the highest level spends almost $5,000.
Other Health Expenses Aren’t Far Behind Health Insurance
No matter what educational level you are a part of, you can get sick. You can end up in the hospital, have a baby, or need over the counter medication for allergies. There are many possibilities when it comes to the required money to keep yourself healthy, and this is why each educational level spends a portion of their income on medical expenses.
The highest level spends about $2,300 on medical expenses. Going down the list, the households with at least one bachelor’s degree spend almost $2,000. Houses with a high school diploma spend around $1,000 of their $35,000 annual income. The lowest level spends a little more than $800 of their income. It’s important to note that many areas have government assistance for people who qualify for free health care.
Lower Educational Levels Spend Less Of Their Income On Taxes
People are often talking about how higher income levels don’t spend as much on taxes than lower income levels. When it comes to educational standards, this seems to be the exact opposite. Yet, you also need to keep in mind that people who have less than a high school diploma tend to have minimum wage jobs where the company takes out more for taxes compared to higher-paying or salary jobs.
When it comes to the lower educational group, they spend a little over $400 in taxes between the federal and state governments. When it comes to people who have a high school diploma, a little over $2,000 is paid to the government through taxes. Households with a bachelor’s degree pay the government nearly $13,000. The highest level pays about $26,000.
Entertainment Is Important For All Education Levels
We all want to take a night out once in a while. People want to go out with our friends, have a date night, go to a movie, or go to a concert. We often use these forms of entertainment as a way to forget about the stress of life for a least a couple of hours. Whether it is getting a monthly subscription to Netflix or taking a cruise, entertainment is an excellent form of personal therapy for everyone.
Of course, the more money you make, the more money you will put toward entertainment. Households sitting at the highest educational level spend about $5,200 on entertainment. Families with at least one bachelor’s degree spend close to $4,000. For homes with a high school diploma, about $1,700 is spent on entertainment. The lowest levels spend about $1,100 on average.
The Lowest Educational Levels Spends As Much As They Bring In
In reality, most people in the United States have a bachelor’s degree or less. Even people who received their master’s or doctorate degrees worked their way up and understood the struggles that people in the lower levels face. This is one reason why people who have a higher degree will save as much of their income as possible. Unfortunately, this isn’t always an option for people at the lower levels.
In fact, the lowest educational level spends as much money as they bring in. Sometimes, they need a little boost through a personal loan to make it through the year. Because of this, the average household puts less than $1,000 into savings. When it comes to the highest educational level, the average family saves about $23,000 a year.
Most people take out a loan from the bank from time to time. This might be because you need a loan for school because you didn’t receive financial aid or because you need a little help paying bills for the next couple of months. Unfortunately, for the lower educational levels, it is common for them to take out small loans to help them pay their bills, buy groceries, and simply keep a roof over their heads.
The truth for the lowest educational level is that most of their income comes from loans, whether it’s friends, family members, or a bank. They are also more likely to pull money out of their savings than the higher educational levels. While higher levels tend to take out loans, it’s more often for cars, boats, or other similar items and not to help them pay their bills.
All Educational Levels Give A Little Money To Charity
There is a saying that people who have little are more likely to give more. While this saying isn’t ultimately proven, what the study does show is that every educational level gives some of their annual income to a charity. The average household in the lowest educational group spends close to $700 on charities or giving other people gifts. At the next level, homes with a high school diploma spend close to $900.
Households who have at least one bachelor’s degree spend around $2,200 of their annual income on gifts and charity. When it comes to the highest educational level, the average household spends about $4,000 every year.
The Lowest Educational Level Finds Other Means Of Income
When you can save over $5,000 of your income every year, it is easy to feel more comfortable about only having one job or two part-time jobs. While the average household has 2 to 3 jobs, people in the lower educational levels still need to find another way to make their income a little higher throughout the year.
Other than holding down more than one job, households in the lowest two levels look to people for loans, garage or rummage sales, and other means to make some extra money. Even if the person decides to mow the neighbor’s yard for $50 once a week, this is a way to put a little more money into their checkbook. Households in the higher two educational levels are less likely to look for another means of income.
Utilities Are Expensive For All, But Easier For Higher Levels To Pay
When it comes to your city utility bill, it doesn’t always matter what educational level you are sitting in. Whether you have less than a high school diploma or a doctorate degree, you need to pay your electricity, water, and other fees found in your utility bill. While most areas will have a “flat rate” for homeowners or give people who struggle paying their bill a little assistance, all levels see their bill as expensive.
When it comes to the highest educational level, they spend a little over $3,000 on their utility bills. Going down the line, households with at least one bachelor’s degree around $2,600. Households with a high school diploma spend about $2,2000. The lowest level spends about $1,800.
The Miscellaneous Section Is Nearly The Same For All Levels
While you don’t know exactly what is part of the miscellaneous section, it’s probably several things. Housing decorations might be seen as various or food for the household’s pets. If there are children, there are always toys to look at, and maybe that brand new Christmas tree is something the family couldn’t pass up.
No matter what is a part of the miscellaneous section, every educational level is a part of it. And unlike the other sections in the study, they all spend around the same amount of money in this category. The lowest educational level spends about $1,300 on their miscellaneous items. The highest educational level spends about $3,000. While this is a little over half than what the lowest level paid, it is essential to remember the amount of money each level brings home.
There are several types of phones available to use. No matter what the educational level is for someone, they need a cell phone. In fact, it is hard to remember how we lived without a cell phone before, though many of us did. Phone bills are just like utility bills, and they will follow you whether you have less than a high school diploma or received your doctorate.
The highest educational level spends about $1,600 of their income on phones. The households that have at least one bachelor’s degree spend just a few dollars less than this. At the next level, at least a high school diploma spends around $1,000 every year. The lowest level spends about $800.
Clothing Is Something Every Educational Level Needs
While every educational level needs to buy clothing every year, the type of clothing and how much they spend will depend on their educational level. For all members of their household, people who hold less than a high school diploma spend a little over $1,000 on clothing. Families who have a high school diploma spend a few dollars more.
For households with at least one bachelor’s degree, they spend about $2,200 on clothing, nearly a $1,000 jump. For the highest level, about $2,700 is spend on clothing every year. It is important to remember that clothing doesn’t just mean shirts and pants. It also includes shoes, socks, winter gear, and swimsuits.
Many people are wondering what will happen to this study in 20 years. The fact is that what people think about education, whether it is a family or a business is changing. Looking back 20 or so years ago, people could get a good-paying job with only a high school diploma.
These days are vanishing before our eyes as people who hold a bachelor’s degree are now seeing that their education isn’t enough for the job they want. This means that most of the higher-paying jobs with benefits have educational requirements like a master’s or doctoral degree.
Social Classes Are Changing Along With Educational Levels
The most significant problem people see in the future with the increased need for higher education with jobs is that it’s leading more people down to the lower levels. The struggle is not everyone can pay for a degree in higher education, whether this is a bachelor’s, master’s, or doctoral degree.
Another factor is that some people struggle when it comes to their education. While they can achieve their bachelor’s and even a master’s degree, certain factors come into play, and they are unable to attain their doctoral degree, which can keep them from living in a higher income bracket.
One factor to consider is where the correlation between educational level and income levels will stand in the future. When fewer people can enter college because it is too expensive, fewer people can apply for specific jobs.
This can make some businesses decrease their requirements and only require a high school diploma, some college, or a bachelor’s degree instead of a master’s degree. If this happens, the lower educational levels can see a rise in income while the higher educational levels remain the same. Of course, this also depends on what happens with the minimum wage as well.
No matter what happens in the future, the factor that will always remain the same is that you need money in order to save or spend it. If you only bring home $30,000 a year, you need to have a different budget compared to someone who brings back $100,000 a year.
Of course, some bills will naturally increase with a higher salary while others will increase by choice because you have more money to spend. For instance, you are more likely to buy the newest iPhone if you can afford it.
Households in the lower educational levels struggle to pay their bills, and they know that they need to watch their pennies. This means that they are more likely to spend money on what they need over what they want. For example, they will purchase a car at $5,000 instead of $10,000 because the lower-priced vehicle does the same, and it’s in their budget.
However, households, where they make close to $100,000 a year, are more likely to look at vehicles that are newer and closer to $20,000 because they can afford it, and they look at how long the car will last. People in the higher levels for more on future long-range plans than what they need now, which is what people in the lower levels focus on.
How did we find this stuff? Here are our sources:
“This is how Americans spend their money based on their education level.” Kathleen Joyce, Fox Business. June 2019.
“How Americans Make and Spend Their Money, by Education Level.” Jeff Desjardins, Visual Capitalist. June 2019.
“How do Americans Spend Money? US Household Spending Breakdown by Education Level.”
“How Americans Make And Spend Their Money, By Education Level.” Tyler Durden, Zero Hedge. June 2019.