Financial Fears Grow, But Cooler Heads Prevail... Research Shows Americans Dig In For the Long Term, Stay the Course
Dramatic, Record-breaking Cutbacks in Holiday Spending
December 3, 2008 (Des Moines, Iowa) — New research from the Principal Financial Well-Being IndexSM reveals an inverse relationship between fear and basic financial behavior. While financial well-being concerns continue to escalate, Americans are “digging in their heels” and staying the course when it comes to their retirement savings.
While the majority of Americans have reduced overall spending, 90 percent of American workers currently participating in their company’s retirement plans have not made changes (decreased their contribution, taken out a loan or hardship, stopped contributing, etc.). Further, 11 percent of workers indicated they actually increased the amount they are saving.
The Index, which surveys both American workers at growing businesses with 10 to 1,000 employees and retired Americans, is released quarterly by the Principal Financial Group® and commissioned by Harris Interactive®.
Dan Houston, president of Retirement and Investor Services at the Principal Financial Group, said, “The findings paint the real story of how Main Street America is reacting to this uncertain economy. At times like these, cooler heads prevail. Fear is a powerful motivator and it’s sending Americans back to the basics — long term view, stay the course, diversify, dollar cost average, take advantage of payroll deduction and automatic savings opportunities. Do not leave money on the table (employer match). Workplace savings is the best thing we have going for us in a recession.”
Americans Tighten Their Belts, Adjust Monthly Budgets
The survey indicates that Americans continue to reduce spending because of current economic conditions. Two-thirds of workers and nearly six out of 10 retirees (59 percent) said they have reduced their overall spending during the past two months. Among workers and retirees who said they are on a monthly budget, more than six out of 10 (64 percent and 63 percent, respectively) made adjustments because of fear over the economy, job stability or rising prices.
Tis the Season – or Is It? Reelin’ In Holiday Spending
The Index revealed an unprecedented increase in the survey’s eight-year history showing that Americans are reeling in spending this holiday shopping season like never before. More than half of workers (53 percent) and 49 percent of retirees (both up significantly from 29 percent a year ago) plan to spend less money on holiday gifts this year. While less than half of workers (42 percent, down dramatically from 59 percent) and retirees (47 percent, down from 64 percent) plan to spend the same as last year, only a small percentage of both indicated they would spend more (5 percent and 4 percent, respectively).
Other Key Survey Findings:
- Change in Holiday Plans—Because of the economy, workers and retirees indicated they will make the following changes to their holiday plans:
- Fifty-two percent of workers and 41 percent of retirees said they will spend less money per gift.
- Nearly half of workers (49 percent) and about one-third of retirees (31 percent) plan to scale back on the number of people for whom they buy gifts.
- About one-third of both workers and retirees (35 percent and 32 percent, respectively) indicated they will travel less.
- Twenty-five percent of workers and 27 percent of retirees plan to donate less to charities.
- Nearly one-fifth of both workers (18 percent) and retirees (21 percent) indicated they will not host a holiday party.
- Monthly Budgeting—Workers and retirees indicated they have cut the following expenses from their monthly budgets:
- Media subscriptions (27 percent workers, 31 percent retirees)
- Gym membership (14 percent workers, 9 percent retirees)
- Landline phone service (13 percent workers, 6 percent retirees)
- Lawn service (12 percent workers and retirees)
- Television services (11 percent workers and 3 percent retirees)
- Job Security:
- Forty-one percent of workers are concerned their company will reduce its number of employees in the next year (up from 25 percent last year).
- Ten percent of workers are concerned their company will go out of business in the next year (up from 6 percent last year).
- Less than half of workers (44 percent) said they have no concerns about the future of their company (down from 53 percent last year).
- Thirty-six percent of workers indicated they are considering taking on a second job in order to make ends meet during the economic slowdown and rising costs.
- Emergency Funds:
- Fifty-six percent of workers (up from 50 percent last quarter) and 69 percent of retirees (up from 67 percent last quarter) have an emergency fund they can tap if they lose their job or incur an unanticipated major expense.
- Significantly more workers (30 percent) compared with last quarter (23 percent) could cover more than six months of living expenses with their emergency fund.
- Fifty-four percent of retirees compared with last quarter (52 percent) could cover more than six months of living expenses with their emergency fund.
See the full report and past results at www.principal.com/wellbeing.
Methodology
This Principal Financial Well-Being IndexSM survey was conducted online within the United States by Harris Interactive on behalf of the Principal Financial Group® between Oct. 22 and Oct. 29, 2008, among 1,179 employees and 625 retirees. This is one in a series of quarterly studies to identify and track changes in the workplace of small and midsize (growing) businesses. The first Principal Financial Well-Being IndexSM survey was conducted in the United States in 2000.
Employees consisted of adults 18-plus who work at small and midsize (SMB) U.S. businesses (firm size 10-1,000 employees). Retirees consisted of adults age 60-plus who reported they are retired or those who are employed part time or self-employed and have retired from a previous career. Results were weighted as needed for age by gender, education, race/ethnicity, education, region and household income. Propensity score weighting was also used to adjust for respondents’ propensity to be online.
All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error that are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments. Therefore, Harris Interactive avoids the words “margin of error” because they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100 percent response rates. These are only theoretical because no published polls come close to this ideal.
Respondents for this survey were selected from among those who have agreed to participate in Harris Interactive surveys. The data has been weighted to reflect the composition of the entire population of adult employees working for small to midsize U.S. businesses and retirees. Because the sample is based on those who agreed to be invited to participate in the Harris Interactive online research panel, no estimates of theoretical sampling error can be calculated.
About the Principal Financial Group
The Principal Financial Group® (The Principal®)[1] is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance, and banking through its diverse family of financial services companies. A member of the Fortune 500, the Principal Financial Group has $308.0 billion in assets under management[2] and serves some 19.0 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.
About Harris Interactive
Harris Interactive is a global leader in custom market research. With a long and rich history in multimodal research that is powered by our science and technology, we assist clients in achieving business results. Harris Interactive serves clients globally through our North American, European and Asian offices and a network of independent market research firms. For more information, please visit www.harrisinteractive.com.
