HENRYs (High Earner, Not Rich Yet) Risky Lifestyles Are a Valuable Opportunity for Financial Services Companies
By Lesley Sloggett, Research Director, Consumer Goods & Services & Liz Miller, Vice President, Business Development | March 30, 2021
What do you call a 24–40-year-old with household income of over six figures, yet still lives on the financial edge? A HENRY – a High Earner who is Not Rich Yet. Where HENRYs typically have expensive spending habits, they are bogged down by debt (>$50,000+) and/or don’t have a large nest egg of savings (less than the amount of three months’ salary available in non-retirement fund accounts). This translates to a potentially perilous situation for HENRYs. If a HENRY were to stop working, their financial picture would alter dramatically. Work incomes, not investments or savings, prop up the lifestyle that a HENRY leads. Between paying off debt, supporting living expenses, and the upkeep of an often lavish lifestyle, HENRYs can find themselves living pay cheque to pay cheque. We heard from a HENRY who summarized a typical way of living as “Money is meant to be spent. I do recognize the need and value in saving, but when it comes time to make big purchases, I don’t hesitate”.
Using our proprietary software, Maru/HUB, we ran a US-only study with this niche group through Maru’s Instant Qualitative platform which allowed us to efficiently moderate respondents over the course of three days and engage with topics centered around financial sentiment, travel, and wellness. We will be exploring what we learned with this group in a series of releases – all aimed at taking a pulse on how HENRYs are thinking, feeling, and behaving during these unparalleled times.
First, we’ll explore how HENRYs have been financially coping during the COVID-19 pandemic. Has the precarious nature of their finances hurt them during these unprecedented times? Have they changed their spending and saving habits?
HENRYs optimistic outlook has been boosted by the Pandemic
In general, HENRYs are feeling financially optimistic at this time. “Covid has actually helped my family save more money and spend less” is a common sentiment with this group. Most HENRYs indicate not having changed their approach to managing finances but do not have the same options for their discretionary funds and therefore have effectively saved money. Not surprisingly the lack of travel and the ability to spend on in-door dining and entertainment has been a money saver. Similarly, there has been a cut back on clothing and personal care expenses. With the lack of social interaction and shift to work from home over the past year, HENRYs reflect that buying new clothes, footwear, and other items hasn’t been as much of a priority.
So where is the extra money going? Remember, most HENRYs have sizable debt loads, from mortgages to credit card bills. With extra money at the ready, HENRYs have been dedicating those funds to decreasing their financial liabilities. Most HENRYs are applying some of these savings toward their debt and directing portions to long-term investments.
HENRYs high discretionary spending will return rapidly
Interestingly, this behavior doesn’t look like it will last. While HENRYs are mindful of the debts they owe and can speak to their pre-COVID way of living (often dominated by multiple trips a year and a high priority against entertainment oriented discretionary spending), they don’t connect the two as being of particular concern, or even necessarily on their radar. For the most part, HENRYs do not appear cognizant of the risk that they may be living above their means and interestingly represent themselves as being more frugal than friends/families/peers. Reflecting on the System 1 side of consumers wiring, a key ingredient of our research approaches at Maru, the gap between what HENRYs say about their financial situation and what they do with their finances is high.
Those who chose to invest over the course of this turbulent year, express feeling even more emboldened to take on riskier investments (like crypto currency) going forward. Coupled with the desire to get back to normal life, especially picking back up their travel schedules, the extra money saved over the course of this year is likely not to recur in coming years.
HENRYs are ripe for radical innovation from Financial Services companies
Where is the opportunity with HENRYs for financial services companies? First, traction amongst HENRYs to personal finance products and services is low with most having very little exposure to personal finance help and a general feeling that services and products do not meet their needs. Providing more debt repayments options and focusing on the benefits of finding easy ways to save are messages that are likely to resonate well with the HENRY.
Additionally, given how comfortable most HENRYs feel with their current financial state and their general optimism about the future, they are willing to accept a higher level of risk than others at similar life stages. Showcasing that portfolio of options to this market would likely be intriguing.
We cannot forget credit cards. HENRYs are comfortable with having debt and they recognize the benefit access to credit provides to their lifestyle. Credit cards with no annual fees that offer cash back incentives are generally seen as table stakes for this group. HENRYs seek out credit cards that offer the ability to prop up a travel lifestyle. Important to note, travel rewards need to be flexible as HENRYs want customizable rewards that suit their specific travel preferences best. A HENRY said it best “My perfect card would have no annual fee, a low interest rate and let YOU choose your own rewards”.
As we move forward toward a world with less COVID-19 restrictions, expect HENRYs to fall back into pre-existing patterns, with a little less debt and a little more saved.
Maru’s Instant Qualitative platform allowed our team to efficiently gain meaningful detailed qualitative insights. It can be particularly effective in engaging hard to reach audiences cost effectively. As you consider specific audiences you’d like to engage, keep this unique and dynamic tool in mind.
We have more to come in the weeks ahead - stay tuned!