It has been close to six years after the Great Recession, and despite the constant messages that everything is getting better in the economy, a significant number of Americans aren’t experiencing that same level financial confidence, says a new in-depth study by one of the nation’s leading research institutions.
A new study conducted by Pew Research Charitable Trusts’ entitled “Americans’ Financial Security: Perception and Reality” found that a clear majority of Americans lack the financial preparedness in case of an emergency and they either just break even or spend more than they earn each month.
The survey reported that 57 percent aren’t ready for a considerable financial setback, 55 percent live beyond their means and one-third have no savings at all. These are ingredients for a recipe of personal financial disaster. But it isn’t anything new at all because there have been endless studies and polls highlighting this pressing monetary disarray in households across the United States.
Furthermore, there doesn’t seem to be any improvements. The Pew survey discovered 56 percent rate of respondents rate their own financial situation as positive, up from just 55 percent a year ago. Also, only 27 percent gave the economy a positive grade, which is relatively unchanged from the levels observed just prior to the recession.
Why are so many consumers vulnerable? A majority of the respondents experienced a financial shock within the past year, such as a major car or house repair, a hospital visit or the loss of a spouse. This is what’s causing 56 percent reported worrying about their overall finances in the past year.
Of the aforementioned statistic, 83 percent of those individuals are concerned about a paucity of savings, 71 percent fear not being able to cover their regular expenses and 69 percent are petrified about saving for retirement.
What many may find interesting about this study is that personal financial fears are found in all income demographics. For instance, Americans with higher incomes and more education were more likely to be confident about their financial situation, but 22 percent still felt insecure, 12 percent reported having less than $10,000 in liquid wealth and 10 percent had no savings.
This level of financial despair is causing a vast number of people to start dismissing the concept of the American Dream: start poor, work hard and become rich. Prior to the economic collapse, 39 percent believed in the American Dream, but fast forward today and that number has shrunk to just 23 percent.
“All these years since the financial crisis, we’re reminded that the financial condition of many Americans have moved from intensive care to rehabilitation,” said Mark Hamrick, Washington bureau chief at personal finance site Bankrate.com, in an interview with the Wall Street Journal‘s MarketWatch.
If the U.S. economy is improving then what’s going on? Well, experts say there could be a variety of things:
- Near-zero interest rates are prompting people to spend and borrow more.
- The labor force participation rate is at a 36-year low.
- The cost food is rising at an exponential rate.
- The BLS itself has reported a large number of underemployed workers.
- Consumers are still shackled by enormous credit card, auto loan and student loan debt.
The online survey was conducted with 7,845 households between Nov. 6 and Dec. 3, 2014.Read More