Back in grasshopper mode for American economy

Return of the grasshopper economy. Photo source, Getty Images

If Aesop were alive and writing today, the hard working Ant, who saves and preps for disaster, would get stepped on by Ben Bernanke and the Grasshopper, who lives for today, would get nothing but encouragement to keep on ignoring the future.

The National Foundation for Credit Counseling released its seventh annual Financial Literacy Survey Monday finding that Americans are spending more money, but more than three-quarters don’t feel secure financially.

“This year’s survey results provided somewhat of a mixed message,” Susan C. Keating, president and CEO of the NFCC, in a press release.  “More than one in four consumers indicated they are spending more than last year, yet 77 percent admitted to having financial worries, listing insufficient savings as their top financial concern.  While consumers moving out of recession mode and becoming more comfortable with spending is positive for the nation’s economy, they need to be mindful of the fact that increasing spending without a safety net in the form of savings could have a negative impact on their personal economy.”

As the economy has heated up, Federal Reserve figures show more Americans are taking on more debt. Yet, wages according the Labor Department have fallen in the last year, with the average weekly pay in the nation dropping $10.  In the meantime, Americans who would like to be disciplined and save have little chance of that, with banks paying less than a percent on savings accounts and other core products upon which people used to build nest eggs.

It begs the question, how is this economic expansion, in which the costs for gasoline, food, college, health care and housing are all increasing, are Americans keeping up.

Well, here’s a picture of how they’re doing from the NFCC’s survey of a representative sample of more than 2,000 Americans:

Regarding consumer responses around financial concerns, respondents were asked which areas of personal finance currently worry them the most, and were allowed to select multiple responses, with results as follows:

1.    Not enough savings – Overall, 57 percent of Americans indicated they are worried over a lack of savings, including forty-three percent who are concerned about not having enough “rainy day” savings for an emergency, and 38 percent concerned about retiring without having enough money set aside.  Although fairly evenly divided, the data suggest that having enough money to resolve daily emergencies takes precedence over the longer term retirement planning.
2.    Not being able to pay financial obligations – A total of twenty-six percent of U.S. adults, or roughly 61 million people , were worried  about servicing their debt commitments, including  concerns around paying credit card debt, 13 percent, repaying student loan debt 8 percent,
an inability to make monthly vehicle payments 7 percent, and not being able to pay off existing medical debt 6 percent.
3.    Health insurance – One in four U.S. adults are worried about health insurance – either not being able to afford it 19 percent and/or not having any 17 percent.
4.    Credit – While 19 percent were worried about their credit score and/or lack of access of credit overall, 16 percent were anxious about their  score, with nine percent concerned over their lack of access to credit, suggesting that consumers continue to realize the importance of credit in their lives.  However, most adults have neglected to review their credit report 65 percent or score 60 percent in the past year.
5.    Job loss – Eighteen percent, or more than 42 million Americans , indicated fear of job loss as a major concern, a number that is disturbingly high.
6.    Foreclosure – As the least of consumers’ concerns (among those listed), a comparatively small four percent of Americans are worried over losing their home to foreclosure, undoubtedly a positive signal for the housing industry and the economy as a whole.
The good news is that 20 percent of U.S. adults indicated they do not have any financial worries, a strong sign of consumer confidence.

Remaining stubbornly consistent over the past three years, 40 percent of U.S. adults gave themselves a grade of C, D, or F on their knowledge of personal finance, thus it is not surprising that nearly four in five 78 percent agree that they could benefit from additional advice and answers to everyday financial questions from a professional.

Rob Varnon