More than a third of Americans admit their spending habits have
been influenced by images and experiences shared by their friends
on social media and confess they spend more than they can afford to
avoid missing out on the fun, according to Schwab’s 2019 Modern
Wealth Survey, an annual examination of how 1,000 Americans think
about saving, spending, investing and wealth.
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Terri Kallsen, Executive Vice President
and head of Schwab Investor Services (Schwab)
Survey respondents place blame on social media platforms and not
people—they rank social media as the biggest “bad” influence when
it comes to how they manage their money, while they put friends and
family at the top of “good” influences.
According to the survey, three in five Americans pay more
attention to how their friends spend compared to how they save,
with an equal number saying they’re at a loss to understand how
their friends are able to afford the expensive vacations and trendy
restaurant meals they portray on social media.
The pressure to spend as a result of social media envy and the
desire to not be left out of friends’ experiences is particularly
acute among Generation Z and millennials, the survey found:
All Millennials
Generation Z
Wonder how friends can affordexpensive
experiences posted on socialmedia
60% 72%
74%
Pay more attention to how their
friendsspend versus save
57% 53%
61%
Spent more money than they can affordto
participate in experiences with friends
35% 48%
41%
Influenced by social media to spendmoney
on experiences
34% 49%
44%
“The burden to ‘keep up with the Joneses’ has been part of our
culture for decades, but it appears that social media and the fear
of missing out (FOMO) have increased the pressure to spend,” said
Terri Kallsen, executive vice president and head of Schwab Investor
Services. “Spending is not the enemy, but when we allow social
pressure or other forces to lure us into spending beyond our means,
it can impact long-term financial stability and become a larger
problem.”
Despite the financial pressures lurking in their social media
feeds, 59 percent of Americans consider themselves to be savers,
and 65 percent say they’re willing to sacrifice spending money on
experiences now to save money for later in life.
However, a significant number of Americans are still struggling
to save:
- A majority (59 percent) live paycheck
to paycheck
- Nearly half (44 percent) typically
carry a credit card balance
- Only 38 percent have built up an
emergency fund
- On average, they spend almost $500 a
month on “non-essential items”
Planners demonstrate better money and investing
habits
For those looking for a way to stay the course, Schwab’s survey
shows that more than 60 percent of Americans who have a written
financial plan feel financially stable, while only a third of those
without a plan feel that same level of comfort. Those with a plan
also maintain healthier money habits when it comes to saving:
Planners Non-planners
All Pay bills and save
each month 78% 38%
50% Have an emergency fund
68% 26% 38%
Automate a portion of their income to go
intosavings
74% 25%
39%
Never carry a credit card balance and
makeother loan payments on time, or have no debt
45% 27%
32%
Planners also demonstrate good investing behavior:
Planners*
Non-planners*
All*
Consider risk tolerance when investing
75% 56%
64% Aware of fees and investment costs
74% 49%
60% Regularly rebalance
portfolio 85%
57% 69%
Feel ‘very confident’ about reaching
financialgoals
56% 17%
28% Have a
diversified portfolio 20%
9% 14%
*Among 2019 Modern Wealth Survey participants who say they
have an investment account
Additionally, more than half of planners (52 percent) are
focused on how their friends save rather than spend money. In fact,
52 percent of planners say their friends actually motivate them to
save and invest.
Despite the benefits of planning, Schwab’s survey shows that
only 28 percent of Americans have a financial plan in writing. And
among those without one, nearly half (46 percent) say it’s because
they don’t think they have enough money to merit a formal plan, 18
percent say it’s too complicated, and 13 percent say they don’t
have enough time to develop one.
“We want to change the perception that financial planning is
inaccessible, too expensive and too complicated,” said Kallsen.
“Most people have short-term and long-term goals, either in their
heads or documented informally. We can help capture those ideas and
create a plan to achieve them. It’s that simple.”
If I had a Million Dollars (Would I be Rich?)
According to the survey, Americans believe it takes an average
$2.3 million in personal net worth to be considered “wealthy.”
That’s more than 20 times the actual median net worth of U.S.
households, according to the Federal Reserve’s Survey of Consumer
Finances released in 2017.
More than half of Americans are optimistic that they will be
wealthy at some point in their lives, and two in five believe they
will achieve that goal within a decade. Eight percent say they
already consider themselves wealthy, although their numerical
definition of wealth is lower—they believe they achieved wealth at
almost $700,000 in net worth.
Despite the high dollar amounts Americans use to define wealth,
when it comes to feeling personally wealthy, 72 percent say it
isn’t about a dollar amount at all, but rather the way they live
their lives.
When asked what they would do with a sudden $1 million windfall,
more than half (54 percent) of survey respondents say they would
spend it—on a house first, followed by cars and travel. In
addition, they say they would use the funds to pay down debt (28
percent), invest (23 percent) and save (21 percent). In comparison
to other generations, Gen Z respondents were the most likely to say
they would save at least a portion (37 percent).
Schwab has created a Modern Wealth Quiz to help people gain
insights about their own saving, spending, and investing habits.
The brief, multiple-choice questionnaire is available at
www.schwab.com/MyModernWealth.
About the Modern Wealth Survey
The online survey was conducted by Logica Research from February
8 to February 14, 2019, among a national sample of 1,000 Americans
aged 21 to 75 and an augment sample of 200 older Gen Zers aged
18-22 for generational comparisons. Quotas were set to balance the
national sample on key demographic variables. Supporting
documentation for any claims or statistical information is
available upon request. The margin of error for the national sample
is three percentage points.
About Charles Schwab
At Charles Schwab, we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity. More
information is available at www.aboutschwab.com. Follow us on
Twitter, Facebook, YouTube and LinkedIn.
Disclosures
Through its operating subsidiaries, The Charles Schwab
Corporation (NYSE: SCHW) provides a full range of securities
brokerage, banking, money management and financial advisory
services to individual investors and independent investment
advisors. Its broker-dealer subsidiary, Charles Schwab & Co.,
Inc. (member SIPC, www.sipc.org), and affiliates offer a complete
range of investment services and products including an extensive
selection of mutual funds; financial planning and investment
advice; retirement plan and equity compensation plan services;
compliance and trade monitoring solutions; referrals to independent
fee-based investment advisors; and custodial, operational and
trading support for independent, fee-based investment advisors
through Schwab Advisor Services. Its banking subsidiary, Charles
Schwab Bank (member FDIC and an Equal Housing Lender), provides
banking and lending services and products. Logica Research is not
affiliated with the Charles Schwab Corporation or its affiliates.
More information is available at www.schwab.com and
www.aboutschwab.com.
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