School of Business

rss twitter LinkedIn Facebook YouTube Blogs

Did the Great Recession Change American Saving and Spending Habits? A New Report Takes a Look

Dean Doug Guthrie (third from right) and Global Financial Literacy Excellence Center Director Annamaria Lusardi (far right) hosted a discussion of Americans' financial capability that included speakers (L to R) U.S. Assistant Treasury Secretary for Financial Institutions Cyrus Amir-Mokri; Stacey Stewart, U.S.  president of United Way Worldwide; U.S. Security and Exchange Commission Chair Mary Jo White; Richard Cordray, director of the Consumer Financial Protection Bureau; IEF CEO Richard Ketchum; and IEF President Gerri Walsh.

Dean Doug Guthrie (third from right) and Global Financial Literacy Excellence Center Director Annamaria Lusardi (far right) were joined for a discussion of Americans’ financial capability by (L to R) U.S. Assistant Treasury Secretary for Financial Institutions Cyrus Amir-Mokri; Stacey Stewart, U.S. president of United Way Worldwide; U.S. Securities and Exchange Commission Chair Mary Jo White; Richard Cordray, director of the Consumer Financial Protection Bureau; foundation CEO and Chairman Richard Ketchum; and foundation President Gerri Walsh.

A new report on Americans’ financial capabilities found that a higher proportion of families are having no difficulty covering their monthly expenses, compared with three years ago. But many Americans still experience financial stress, including being overdrawn from checking accounts, making late mortgage payments or having unpaid medical bills.

Those are some findings of the “Financial Capability in the United States:  Report of Findings from the 2012 National Financial Capability Study,” released May 29 at GWSB at an event hosted by the School’s Global Financial Literacy Excellence Center (G-FLEC).

Conducted by the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation in consultation with the U.S. Department of the Treasury and the President’s Advisory Council on Financial Capability, the study analyzed the current state of financial literacy among Americans, compared to findings from a pilot survey taken in 2009.

Overall, the study found that in the few years that have elapsed since the financial crises of 2008-09, including the bursting of the housing bubble and the Great Recession, there are signs of recovery in Americans’ financial capabilities but also “evidence of the medium-term effects of economic shock.”

For instance, more U.S. adults in 2012 reported paying bills without difficulty than in 2009, and many have put aside short-term funds for emergencies. However, fewer have investments in retirement accounts, and more have experienced bankruptcy or foreclosure.

Another striking finding was that as many as 30 percent of Americans, and 43 percent of younger Americans, reported using alternative borrowing methods, including payday loans, pawn shops, auto title loans, tax refund advances or rent to own shops, sometime in the past five years. Meanwhile, financial literacy levels remain low.

“This finding — along with the potentially dangerous borrowing habits — underscores the need for us to continue to explore innovative ways to build financial capability among consumers,” said Richard G.  Ketchum, chairman of the FINRA foundation.

Ketchum was among the financial literacy experts who spoke at GWSB when the report was released. The event was organized by Annamaria Lusardi, GWSB’s Denit Trust Distinguished Scholar in Economics and Accountancy and academic director of G-FLEC.

Dean Doug Guthrie said the School was pleased to have the opportunity to “be a part of a conversation that brings together research, and the passion that people have for research, with real applicability.”

FINRA is the largest independent regulator for securities firms doing business in the United States. Its chief role is protecting investors by maintaining fairness in U.S. capital markets.  The mission of FINRA’s foundation is to provide underserved Americans with knowledge, skills and tools to help them achieve financial success.

Among other specific findings in the study:

  •  A higher proportion of families in 2012 than in 2009 (40 percent versus 36 percent) reported no difficulty in covering their monthly expenses and bills. Satisfaction with personal finance increased.
  • Among those with checking accounts, more than one in five (22 percent) overdraw from those accounts. More than a quarter of respondents had unpaid medical bills and more than one in five (21 percent) mortgage holders have been late with a mortgage payment at least once in the past two years. Signs of financial stress are particularly pronounced among the young (18-34), and those with low income and low education attainment.
  • The percentage of respondents saying they always pay their credit cards in full increased to 49 percent in 2012. However, nearly three out of five credit holders also engage in at least one behavior that generates interest payments or fees.

The test population included people aged 18 to 55 and older from various ethnic, economic and educational backgrounds.

To read the complete report, go here.

 

 

Posted by gwsb on June 5, 2013 | Filed under: GWSB News.


No Comments »

Leave a comment


MBA Admissions and Experience Blog

The members of the MBA Admissions team contribute to the blog with postings about recruitment tours, events, interviews with current students, and insights about the admissions process. The team is composed of:

Christopher Storer, Executive Director
Jason Garner, Associate Director
Patsy Torres, Assistant Director
Jason Smith, Assistant Director
Shelly Heinrich, Admissions Consultant
Jessica Page, Coordinator