Americans Intend to Remain Disciplined with Finances
Spending less, saving more and financial check ups become the new norm
June 23, 2010 (Des Moines, IA) - New research from the Principal Financial Well-Being IndexSM shows Americans intend to remain financially disciplined regardless of economic conditions. Three out of five (61 percent) workers and 55 percent of retirees said they have reduced their spending in the past two months due to the economy, and of those, the majority (79 percent of workers and 84 percent of retirees) intend to continue to spend less in the future regardless of economic conditions.
The number of Americans who have cut back on spending, increased savings and paid down debt in order to rebuild their financial well-being since the recession began in 2008 has continued to steadily increase. Sixty-nine percent of workers spent less in the second quarter compared to 62 percent in the first quarter; 51 percent paid down debt up from 45 percent in the first quarter and 29 percent increased savings in an emergency fund compared to 22 percent.
“It appears a real sea change is taking place in America as consumers work hard to make not only positive but permanent changes in their financial behavior,” said Luke Vandermillen, vice president of retirement and investor services at the Principal Financial Group®. “It’s encouraging to see signs that Americans learned from the recession and are shifting their focus away from the short-term toward long-term financial health.”
As they continue to rebuild and focus on financial well-being, Americans are giving themselves financial check ups. Over half of both workers (58 percent) and retirees (56 percent) have monitored their spending levels in the past year due to the economy and over a quarter of workers (28 percent) and a third of retirees (35 percent) have re-evaluated their investments.
The Principal Financial Well-Being Index, which surveys both American workers at growing businesses with 10 to 1,000 workers and retired Americans, is released quarterly by the Principal Financial Group and is conducted online by Harris Interactive®. This year marks the 10-year anniversary of the survey.
Americans’ satisfaction with financial well-being among highest levels in the last decade
Looking back at the last decade, the Principal Financial Well-Being Index found that, for the most part, the number of Americans who say they are extremely satisfied with their financial well-being has remained remarkably steady with minimal variation.
Workers were asked to identify how much they agreed with several statements relating to concern about their long-term financial future and happiness about their current financial well-being. The percentage of Americans agreeing with the response “I am extremely happy about my current financial well-being” ranged only between 20 and 34 percent over the 10-year period. The few slight dips and spikes that occurred were during key economic events such as the steep stock market downturn of 2002 or housing prices reaching all time highs in 2003 and 2004.
Over the last year, satisfaction has been on the rise. In the second quarter of 2010, 33 percent of American workers indicate they are extremely happy with their financial well-being, up nine percentage points from the second quarter 2009. In the past decade, there are only three other times this level of happiness has been higher.
However, while satisfaction with financial well-being is up year over year, Americans are still cautious. Nearly a third of workers and retirees (31% of both groups) describe their sentiment about the economy and their ability to rebuild their finances as cautious.
“While the last year has certainly been economically tumultuous, the fact that American workers show near record-breaking levels of happiness with their financial well-being this decade is a positive sign,” said Vandermillen. “Expanded access to financial education and new tools for retirement and protection planning have empowered Americans to take charge and improve their financial well-being.”
Fuel Prices Drive Americans’ Summer Travel Plans
More than a third of retirees (35 percent) and two out of five workers indicate the overall economy has had no influence on their summer vacation plans. However, 42 percent of workers and half of retirees said rising fuel prices could potentially impact their summer travel plans, both up significantly from second quarter 2009.
“Many Americans often feel a direct impact from expenses like gasoline, but too much concern about short-term impact can cloud perspective on the big picture and what’s really important, such as long-term savings,” said Vandermillen. “Americans should heed the lessons they learned from the financial crisis – stay the course, spend less, save more, meet with an advisor and continue financial check ups.”
See the full report and past results at www.principal.com/wellbeing.
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 April 28 and May 9, 2010 among 1,133 workers and 501 retirees. Results were weighted as needed for age by gender, education, race/ethnicity, region and household income. Propensity score weighting was also used to adjust for respondents’ propensity to be online.
This is one in a series of quarterly studies to identify and track changes in the workplace of small and mid-sized (growing) businesses. The first Principal Financial Well-Being IndexSM survey was conducted in the United States in 2000.
About the Principal Financial Group
The Principal Financial Group® (The Principal®) 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 $293.4 billion in assets under management and serves some 18.7 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.