As confidence wanes, Americans are changing their habitsby Nate Matherson, writing for LendEDU. Read the full report here.
08/27/2019 –In recent weeks there has been a lot of talk about the risk of an economic recession. While an economic recession is far from certain at this point, we decided to conduct a nationally-representative survey of Americans to gauge their current sentiment towards the situation and to better understand how the risk of a recession may change consumer spending and investing habits.
In short, we found that fears of a recession are changing habits for Americans and that many aren’t feeling confident about their current financial situations.
Full Survey Results
1) Recently, there has been talk about the possibility of an economic recession. While a recession is far from certain, are you planning to change your spending and saving habits due to the risk of a recession?
- Yes, I am planning to spend less and save more (42%)
- No, I am planning to continue spending and saving per usual (45.6%)
- Unsure or none of the above (12.4%)
2) How much do you currently have saved in an emergency fund? Note: If you don’t currently have anything saved, please respond with $0.00. Free response.
- 32% of respondents reported $0.00
- 55.2% of respondents reported $1,000 or less
- Median amount was $712
- Average amount was $9,585
3) Recently, there has been talk about the possibility of an economic recession. While a recession is far from certain, are you planning to change your investment allocation (ex. stocks, bonds, etc.) or investment preferences?
- No, I am planning to continue investing per usual (44%)
- Yes, I am planning to invest more conservatively (16.1%)
- Yes, I am planning to invest more aggressively (3.8%)
- Unsure, or none of the above (36.1%)
4) If the U.S. economy were to fall into a recession, do you believe that your personal finances are strong enough to handle a period of slower economic growth?
- Yes, my personal finances are strong enough (40.4%)
- No, my personal finances are too weak to withstand a recession (37.3%)
- Unsure (22.3%)
Analysis of Results
Many Americans Are Changing Spending Habits
As some have said, including Bank of America CEO Brian Moynihan, “We have nothing to fear about a recession right now except for the fear of recession,” Moynihan said in a Bloomberg Television interview last week.We found that many Americans, 42% of respondents, are planning to save more and spend less as a result recession risk.
Most Americans Don’t Have Adequate Emergency Funds
Most financial advisors recommend having somewhere between 3 to 6 months of expenses saved in an emergency fund. Our survey found that many Americans do not meet this standard.
32% of respondents reported having $0.00 saved in an emergency fund, and the majority of respondents, 55.2%, reported having $1,000 or less saved.
The median result was $711.50, which will not cover basic expenses for more than a month for most Americans. The data was skewed due to some respondents reporting having very large emergency funds, returning an average of $9,585.
Consumers Are Split on Changing Their Investment Allocations
Our survey found that 44% of Americans are not planning on changing their investment allocations. Long-term investors aren’t likely paying too much attention to the recent stock market swings and are holding steady.
However, at least some of the respondents have taken notice of the recent recession talk and are thinking about making portfolio changes. 16.1% of respondents are planning on investing more conservatively, 3.8% are planning on investing more aggressively, and 36.1% are unsure.
Americans Lack Confidence in Their Personal Finances
We found that many Americans (37.3%) do not believe that their personal finances are prepared for a recession and that many are unsure (22.3%) of how the economy would impact them.
All of the data in this report was collected in an online survey by Prolific that was commissioned by LendEDU.
In total, 502 Americans were surveyed. Prolific screened respondents in order to deliver a nationally-representative sample.
This survey was conducted over a two-day span, starting on August 21, 2019 and ending on August 22, 2019. All respondents were asked to answer all questions truthfully and to the best of their abilities.