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‘Saving’ discounts can mess up your finances
Consumer Price Index remains stable in May, slightly below expectations
The Consumer Price Index remained stable in May 2024, although it increased by 3.3% compared to the previous year.
Benzinga – News
Any time you buy two of something and get a third item for half off, or add a few dollars to an online order to secure free shipping, you are “saving.”
Spaving It’s a mix of “spending” and “savings”: spending more to generate savings.
But make no mistake, experts say: saving is mostly about spending.
“It’s always more expensive. It’s not always more economical,” he said. Jeff Galakassociate professor of marketing at the Tepper School of Business at Carnegie Mellon University in Pittsburgh.
The excavation was no neis lately. It seems like something new: the term has rarely appeared in this publication. Not in Merriam-Webster online dictionary. Type it into your word processor and watch the spell checker explode in protest.
‘Spaving’: a concept as old as shopping
The concept behind deparation, however, is very old.
“Spaving, besides being a terrible word, is not a new idea,” Galak said. “These promotions have been around forever.”
Here’s the basic concept: a merchant encourages a customer to spend a little more, or a lot more, by offering a discount as a reward. Buy a third item, or a fourth, or a fifth, and get the last one free. Add ten more dollars to your cart and the $5 shipping fee will disappear.
Who needs a gallon of extra virgin olive oil? Maybe you will, for the right price.
Customers may be seeing a lot of thinning deals this summer. Inflation has been pushing prices up. A dozen eggs cost about twice what they did in 2019. Overall, consumer prices increased almost a fifth between 2019 and 2023, federal data shows.
Consumers are reacting. In response, retailers are launching deals.
Fast food chains are reliving the value meal in the wake of consumer backlash against reports of $15 Big Macs.
Target It is Walgreens announced price reductions in the summer. More customers are choosing discounts own marks.
Spending less on the same Happy Meal you bought a week ago is a no-brainer. Spaving, on the other hand, can quickly get out of control.
‘Splurging’ can lead to overspending and unnecessary purchases
The problem with thrift, experts say, is that it can lead a buyer to overspend on something they don’t want, don’t need and won’t use.
“It’s always good to save money. The problem is when you spend money that you wouldn’t otherwise,” he said. Kimberly Palmerpersonal finance expert at NerdWallet.
Palmer herself recently succumbed to a savings offer.
“It was buy one, get one free,” she said. “I never intended to win a second shirt. It was for my daughter. I went ahead and bought two.
The second shirt was free, so Palmer got a great deal, right?
Well, maybe not. She paid full price for the first shirt. In the absence of the savings agreement, she would have expected a discount. In the end, she said, “I spent more than I wanted.”
When is ‘spreading’ a good deal?
In fact, there’s only one type of thinning offer that guarantees a good deal, experts say: one that makes you spend less money in the end.
“Let’s say you go to checkout and your cart is five dollars below the minimum to save thirty dollars on shipping,” he said. Cassandra Happe, analyst at WalletHub. “So maybe spending the five dollars to get free shipping would be a good idea.”
Most of the time, though, saving makes you spend more: that’s the point, at least from the retailer’s perspective.
And if you’re spending more, are you still getting a better deal? It depends.
Before you commit to buying more of something to get a discount, experts say, ask yourself the following questions:
- Is it something you would buy anyway?
- Can you pay?
- Will you use all of it?
- Is it perishable?
- Do you have space to store it?
Stocking up on laundry pods, frozen steaks, or paper napkins at volume discount prices can make all the sense in the world.
“My husband and I work from home,” Happe said. “So essentials like toilet paper, things like that, we buy in bulk now because we know we’re going to get through this.”
Be careful, though, if you see an offer for spaving on ears of corn, or bananas, or unfrozen steaks. Or anything with a short shelf life. Or anything your family might get tired of consuming. Or anything you wouldn’t buy anyway.
What is the psychology behind ‘spaving’?
The appeal of savings is obvious: consumers like to think they are saving money.
“You feel that temporary emotional euphoria because you feel like you’re stuck in a good deal,” he said. Kris Yamanopartner at Crewe Advisors in Scottsdale, Arizona.
The problem arises, Yamano said, when consumers want to save money so much that they end up spending more and on things they won’t use.
“You go into Target and you’re just there to buy laundry detergent,” she said. “But then there’s a deal in the next aisle and you walk out with a cart full of things you don’t need.”
The arithmetic behind spaving can be complicated.
Let’s say you buy three pairs of shoes, with the third being offered at 50% off.
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A quick calculation reveals that you’re not actually saving 50%. You are only saving that much on one item. If each pair costs $50, you save $25 on your entire purchase, reducing your bill from $150 to $125: a savings of about 17%.
What if the third pair only costs $30? In the typical spaving deal, the retailer gets a discount on the cheapest item. Now, you’re only saving $15, reducing the price from $130 to $115. Your savings fall below 12%.
A consumer can figure this out with an iPhone calculator. But few of us have time to do the math.
“A lot of times with spaving, it’s a high-pressure situation,” Palmer said. “It will expire in the next few hours, at the end of the day, so there is some urgency to it.”
More: Do we really need $1 million in retirement savings? Not even close to that, says a leading economist
Here are some more expert tips on how to shop – and “save” – without overspending:
- Make a shopping list and stick to it.
- Set a budget and don’t blow it.
- If you consider a spaving offer, do the math.
- Before committing to a savings deal, take some time to think.
“I will give myself 24 to 48 hours before I buy something,” he said Jack Howard, head of financial well-being at Ally Financial. After this pause, she said, “if it’s still in my head, then it’s okay.”