Most Americans Are Not Ready For a Financial Setback

New Study Reveals 1/3 in U.S. Have No Savings

Most Americans Are Not Ready For a Financial Setback
June 4, 2015

A recent study from the Pew Charitable Trusts, regarding Americans and their financial security, depicts an unusual contrast in America’s attitude about finances — a strange blend of short-term worry and larger-scale optimism. “Americans’ Financial Security: Perception and Reality” surveyed over 7,000 households across the nation and concluded that for many Americans, the current economic recovery has not translated to financial stability and security.

According to the study, Americans are the most optimistic about economic situations that they have been for years, concerning both their own situation and the overall economy. Still, 57% of the respondents report being unprepared in case of a financial setback, 55% either break even or spend more than their income, and almost one-third of survey respondents have no savings at all.

Those are disturbing numbers, especially when combined with the finding that 60% of respondents did suffer a financial shock in the past year, such as medical bills, loss of a partner, major car/home repairs, or lost/reduced income. Because of the setback, 55% of those respondents reported difficulties with making ends meet.

Other key findings from the survey:

  • Economic Perception – People are beginning to feel better about the overall economy, with 27% giving it a positive rating compared to only 9% in 2008. Similarly, the positive feelings about individual financial situations rose from 42% in 2009 to 56% today.

  • Security – Just over half of Americans (51%) say that they enjoy a financially secure household, while 56% worried about their finances over the past year for a variety of reasons. Of those worries, the three most frequently reported ones were a lack of savings (83%), having insufficient funds to cover expenses (71%), and having too little money for retirement (69%).

    Based on survey results, 92% of Americans would prefer financial security compared to moving up the income ladder. That represents an increase from 85% in a 2011 survey — an odd result considering that the economic situation in 2011 was arguably not as good as it is today.

  • Income and Savings – A less-than-stable income and irregular expense patterns contribute to the financial concerns of many Americans. Only 45% of survey respondents reported stability in income and expenses, and within this group, 36% have no savings. This seems to imply that those with stable income and expenses are expecting that stability to continue — a dangerous assumption given the above numbers on financial shocks.

  • Retirement – Only 26% of respondents expect to experience the traditional retirement path of stopping work entirely and living off of Social Security, savings, and investments. A substantial 21% do not plan to retire at all, and 53% expect to be doing something else, including the possibility of a second career.

Pew suggests that this insight into households’ perceptions of financial security can help to guide policymakers in their proposals to improve families’ financial health. In the end, the issue may be what defines financial security and whether the perception can be changed to encourage more Americans into wiser saving and spending habits.

It has been speculated that the short-term drop in gas prices has translated more into savings and paying bills than it has to spending, which is a positive sign in terms of this survey. Gas savings represent a greater source of monthly income for the less financially secure, and those folks appear to be using their temporary windfall wisely.

We hope that by the time of the next survey, the economy will have fully recovered — and all the positive numbers will be up to reflect a truly warranted optimism.

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