Single people spend more on clothing, recreation and dining out and face higher fixed costs for housing, utilities and communications. They are also more financially vulnerable, since their risks are not shared with anyone. Ming-Hsuan Lee writes that understanding singles’ spending patterns is crucial for policymakers and businesses to cater to this growing demographic effectively.
In recent years, more young people in East Asia, including Taiwan, Japan and South Korea, are opting to remain single. Taiwan, in particular, has seen a significant increase in the number of unmarried people. In 2000, 27.25 per cent of the population aged 25 to 44 were unmarried, a figure that rose to 50.23 per cent by 2022.
Several factors contribute to the increasing number of single-person households. Economic conditions such as high housing prices, income inequality and a volatile job market make it challenging for young people to commit to marriage and family life. Additionally, personal values emphasising individualism and self-fulfillment also play a significant role. Many young people prioritise their careers, personal growth, and freedom over traditional family responsibilities.
How they spend their money
Single-person households (those of people who are never married and live alone) tend to have unique spending patterns compared to multi-person households. Understanding these patterns is crucial for policymakers and businesses to cater to this growing demographic effectively. Our study uses data from Taiwan’s Survey of Family Income and Expenditure collected between 2011 and 2021. We compare single-person households and nuclear families. Our analysis focuses on average expenditures per person, expenditure shares, and income elasticities.
Key findings
Higher fixed costs and no economies of scale
Single-person households bear higher fixed costs in categories like housing, utilities, and communication. These costs are significantly higher because they cannot share these expenses with others, unlike in nuclear families. For instance, the average expenditure per person for housing and utilities in single-person households is NT$156,164, compared to NT$58,108 for nuclear families. This higher cost burden is a direct result of the lack of economies of scale, which enables multi-person households to enjoy greater benefits from shared costs.
Spending on personal well-being
Single individuals tend to spend more on categories related to personal well-being, such as clothing, recreation, and dining out. These expenditures reflect their focus on self-improvement and maintaining a certain lifestyle. For example, single-person households spend an average of NT$27,484 on recreation and culture, compared to NT$13,617 for nuclear families. Similarly, expenditures on restaurants and hotels are higher for single-person households, with an average spend of NT$56,749 compared to NT$30,460 for nuclear families. This difference highlights the priority single individuals place on enjoying their free time and social experiences.
Financial vulnerability
The expenditures of single-person households are more volatile, indicating higher financial risks. This is due to the lack of within-household risk-sharing and the need to bear all costs alone. Specifically, single-person households display greater income elasticity, meaning their expenditures fluctuate more significantly with changes in income. This instability can lead to higher financial vulnerability, especially in the absence of a second income to buffer against economic shocks. When a single individual faces a financial emergency, there is no other household member to share the burden, making them more susceptible to financial distress.
Allocation of expenditures
Single-person households allocate a higher proportion of their expenditures to fixed costs and personal well-being. The largest proportion of their expenditures (28.2 per cent) goes to “housing, water, electricity, gas, and other fuels”. In contrast, for nuclear families, this figure is 18.2 per cent. Single-person households also spend a larger share on “recreation and culture” (4.4 per cent) and “restaurants and hotels” (11.1 per cent) compared to nuclear families, which spend 3.8 per cent and 9.8 per cent, respectively. This allocation shows that single individuals prioritise their living conditions and leisure activities, spending more of their income on these areas.
Lower spending on essentials
Single-person households spend less on essentials such as food and education compared to nuclear families. This can be attributed to the fact that single individuals often dine out more frequently, reducing their grocery bills. Moreover, they do not have to cover the education expenses of children, which significantly lowers their expenditure in this category. For instance, nuclear families allocate 3.5 per cent of their expenditures to “education,” compared to 0.3 per cent for single-person households. This reduction in spending on essentials allows single individuals to allocate more of their income to discretionary spending and personal enjoyment.
Spending patterns of two-person households
Two-person households (households of married couples with no children) benefit from economies of scale, which reduce average costs in several categories, including housing and utilities. However, they still exhibit spending patterns similar to single-person households, especially in lifestyle-related expenses. Their expenditure on items like restaurants and recreational activities remains high, indicating that two-person households may retain some of the spending habits from their single lives. Moreover, the added financial support from a spouse allows for a relatively higher expenditure in categories like housing and financial services, suggesting a higher overall propensity for spending compared to single-person households.
Implications
Our findings suggest that while single-person households enjoy greater autonomy in their spending, they also face higher financial burdens and risks. They allocate more of their income to personal well-being and lifestyle, but at the cost of higher fixed expenses and financial vulnerability. This demographic shift towards single-person households necessitates a re-evaluation of economic policies and business strategies to better cater to their needs.
Policy recommendations
Policies aimed at making housing more affordable for single-person households can help reduce their financial burden. This could include subsidies for single-person households, incentives for developers to build smaller, more affordable units, and the creation of co-living spaces that allow single individuals to share costs while maintaining personal privacy.
Targeted financial planning services can assist single-person households in managing their higher financial risks. Financial literacy programs, budgeting tools, and personalised financial advice can help single individuals make informed decisions about saving, investing, and spending.
Businesses can develop products and services tailored to the preferences of single-person households, focusing on leisure, dining, and personal care. This could include offering flexible meal plans, single-serving product sizes, and services that cater to the social and recreational preferences of single individuals.
Conclusion
As the number of single-person households continues to grow, understanding their spending patterns becomes increasingly important. Policymakers and businesses can use these insights to better address the needs and challenges of this demographic, ensuring that they are supported in maintaining their desired lifestyle while managing the associated financial risks.
- This blog post is based on Does Being Single Bring Freedom or Burden? Examining the Expenditure Patterns of Single-Person Households in Taiwan, Journal of Asian Economics
- The post represents the views of the author(s), not the position of LSE Business Review or the London School of Economics and Political Science.
- Featured image provided by Shutterstock
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