Wed, 10 April 2024 | consumers economy
A new survey from Equitable finds that a vast majority of consumers, about 75%, perceive that their money does not extend as far as it did just a year ago. Although inflation has decreased significantly from its peak in June of 2022, it remains the predominant financial challenge for many. According to the survey, 39% of respondents identify inflation as the largest barrier to achieving their financial objectives, a figure more than double those concerned with high expenses (17%), low income (10%), and the effects of high interest rates on debt (8%).
"We live in an uncertain world, and this undoubtedly impacts how confident we are about our financial futures," remarked Nick Lane, President of Equitable. He referenced the anticipation surrounding the Federal Reserve's potential interest rate cuts later this year, noting, "Our survey found that only one in three Americans believe that lower interest rates would significantly or moderately improve their confidence in achieving their financial goals."
This prevailing uncertainty affects all facets of Americans' financial lives, including how they manage essential versus discretionary spending. For instance, during tax season, a period often seen as an opportunity for financial reprieve, the survey revealed that 80% of those expecting a tax refund plan to use it for essential needs such as living expenses (50%) and debt repayment (29%). Only a small fraction (19%) would allocate their refund towards discretionary spending like travel or entertainment.
Additionally, the survey suggests a need for guidance in balancing short-term spending with long-term savings and financial security goals, such as retirement. Despite the availability of more tax-efficient and potentially income-guaranteeing financial solutions like employer-sponsored retirement plans and annuities, 70% of respondents rely on traditional bank accounts for future savings. On average, individuals save $175 monthly for retirement, yet over a quarter (26%) have not started saving for retirement at all. Contrastingly, average monthly discretionary spending amounted to $400 across various categories.
The independent survey was conducted by a global consumer and B2B panel provider and included 1,000 U.S. adults, representative of the U.S. demographic landscape. It was carried out from February 23, 2024, to March 6, 2024, ensuring participant anonymity.