Report also shows finances take a toll on mental and physical health – Even more so among women
June 14, 2019 — NEW YORK–(BUSINESS WIRE)–Bank of America today announced findings from the latest Merrill Edge® Report, which reveals people are feeling simultaneously optimistic and overwhelmed by their finances. Merrill is committed to empowering clients and helping them plan for the future at every age and in every stage of their financial lives through a combination of tools, people and know-how across Merrill Edge Self-Directed, Merrill Guided Investing, and Merrill Lynch Wealth Management.
The report is a biannual study of more than 1,000 mass affluent1 Americans’ evolving financial concerns and priorities. It found that 85 percent believe how they manage their finances today would make their parents proud. This may be thanks to savvier spending habits and the fact that 85 percent of Americans improved their financial lives in meaningful ways in the last year:
- Forty-five percent worked at improving their credit score, 43 percent worked toward paying off some or all of their credit card debt, and 35 percent established an emergency fund by setting enough aside to live on for three months without an income.
- Far fewer people are paying only the minimum balance on their credit card (17 percent), spending more than half of their paycheck on a single purchase (14 percent), or dipping into their retirement savings (11 percent).
- For parents, 81 percent would like to leave an inheritance to their children, and many (38 percent) are making sacrifices to their lifestyle today to do so, including cutting back on dining out and entertainment (31 percent) and reducing their travel and vacations (26 percent). Others are even delaying retirement (18 percent), taking on a second job or working longer hours (15 percent) in order to do so.
- These positive steps may be leading to a higher level of confidence about one’s financial future. Gen Zers and millennials – 44 percent and 48 percent – believe they’ll be millionaires one day, and the majority of Americans across generations are confident in their ability to retire when they want (80 percent), leave money behind for their children (80 percent), pay off student loan debt (77 percent), and even buy a second or vacation home (57 percent).
- Many are also putting their money where their mouth is, with 42 percent willing to spend more at a retailer whose values align with their own, and 40 percent would stop buying products from companies whose values fundamentally conflict with theirs.
- And for all this great work, Americans feel they deserve a treat – upon reaching a financial goal, 56 percent like to reward themselves, including 71 percent of Gen Zers, 66 percent of millennials, 42 percent of Gen Xers, and 43 percent of baby boomers. The most popular rewards across all age groups include material purchases such as clothing, shoes or jewelry (48 percent); taking a vacation (48 percent); eating at a nice restaurant (40 percent); and indulging in spa/beauty treatments (24 percent).
Mind, body, and toll
While Americans are becoming more conscientious about money and mindful of their spending, many report that their financial life weighs heavily on their minds, affecting both their mental (59 percent) and physical (56 percent) health – even more so among today’s younger generations and women of all ages:
- Gen Z: mental health – 73 percent, physical health – 69 percent
- Millennials: mental health – 69 percent, physical health – 66 percent
- Gen X: mental health – 58 percent, physical health – 54 percent
- Baby boomers: mental health – 40 percent, physical health – 38 percent
- Women: mental health – 64 percent, physical health – 60 percent
- Men: mental health – 52 percent, physical health – 51 percent
The study found that 51 percent are worried about their finances over the next five years, with top concerns including the potential for an inadequate amount of savings (55 percent), political instability (53 percent), a looming recession (47 percent), and market volatility (45 percent). Another source of worry – debt (39 percent):
- Excluding their mortgages, 73 percent of respondents are carrying some form of debt. The types of debt respondents are dealing with the most include credit cards (43 percent), auto loans (36 percent), student loans (20 percent), and personal loans (15 percent).
- Forty-six percent of respondents with debt owe more than $20,000, while 18 percent owe $50,000 or more.
In order to pay off debt, 68 percent of respondents are putting certain activities and milestones on the back burner, including going on vacation (43 percent), buying a car (37 percent), buying a home (30 percent) and having children (19 percent).
“On the bright side, Americans are prioritizing their financial goals, and taking steps towards improving their futures,” said Aron Levine, head of Consumer Banking and Investments for Bank of America. “However, many find managing their money today causes them a great deal of stress. The key is to find the right balance of short- and long-term planning, and always to take steps forward without placing a heavy burden on one’s current financial situation or well-being.”
Hypothetically, if given the choice to never have to manage their personal finances again, Americans would rather:
- Give up all social media platforms forever (41 percent).
- Cut carbs, sugar and/or alcohol from their life (37 percent).
- Lose access to their smartphone for a month (35 percent).
- Run into their ex every time they’re out with their current partner (25 percent).
- Move back in with their parents (25 percent).
Perhaps the need to tackle debt and overcome the stress from their finances are why 55 percent of respondents are currently turning to professional financial guidance, either in person or online, and why two-thirds plan to do so in the future. A growing number are also embracing new technology and financial apps to help save and manage their money, including consumer banking apps (71 percent), money transfer apps (65 percent), personal finance apps (63 percent), and automated investment apps (57 percent).
You can’t take it with you – they hope
Meanwhile, in the midst of the largest generational wealth transfer in history, many Americans (39 percent) expect to inherit or already have inherited all or part of their family’s estate, including cash (68 percent), personal property (57 percent), real estate (53 percent), and securities (41 percent). In fact, 58 percent of Americans believe their financial stability and lifestyle would benefit significantly or only be made possible by an inheritance from their family.
The good news is 92 percent plan to leave money and other assets behind, mainly to their children (59 percent), spouse/partner (54 percent), siblings (17 percent), and nonprofit organizations (17 percent). However, that doesn’t necessarily mean they have a plan in place to do so.
- Sixty-four percent of Americans have not consulted with a financial professional about their estate planning, including 46 percent of seniors and 59 percent of baby boomers.
- One in three parents favor an early inheritance and would rather transfer wealth to their children now, instead of waiting until they are gone.
“Creating a long-term financial plan with reasonable, achievable goals along the way is important,” said David Poole, Consumer Investments Solutions and Client Services executive at Bank of America. “This can help Americans find a balance between living the lifestyle they want now, while working toward major milestones and leaving a legacy for their children.”
For more in-depth information about the financial behaviors and priorities of mass affluent Americans, read the entire spring 2019 Merrill Edge Report. A complementing infographic is available here.
1 Merrill Edge Survey Methodology
Concentrix (an independent market research company) conducted a nationally representative, panel-sample online survey on behalf of Merrill Edge April 17-May 9, 2019. The survey consisted of 1,000 mass affluent respondents throughout the U.S. Respondents in the study were defined as aged 18 to 23 (Gen Z) with investable assets between $50,000 and $250,000 or those aged 18 to 23 who have investable assets between $20,000 and $50,000 with an annual income of at least $50,000; or aged 24-plus with investable assets between $50,000 and $250,000. For this purpose, investable assets consist of the value of all cash, savings, mutual funds, CDs, IRAs, stocks, bonds and all other types of investments such as a 401(k), 403(B), and Roth IRA, but excluding primary home and other real estate investments. We conducted an oversampling of 300 mass affluents in Atlanta. The margin of error is +/- 3.1 percent for the national sample and about +/- 5.6 percent for the oversample market, reported at a 95 percent confidence level.
Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 66 million consumer and small business clients with approximately 4,400 retail financial centers, including approximately 1,800 lending centers, 2,200 financial centers with a Consumer Investment Financial Solutions Advisor, and 1,500 business centers; approximately 16,400 ATMs; and award-winning digital banking with more than 37 million active users, including over 27 million mobile users. Bank of America is a global leader in wealth management, corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations across the United States, its territories and approximately 35 countries. Bank of America Corporation stock (NYSE: BAC) is listed on the New York Stock Exchange.
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