FORT WORTH, Texas – American families intend to bump up their savings and investing through the rest of the year, suggesting a potential reversal of the recent drop in the nation’s savings rate.
A third-quarter surge in positive financial intentions among middle-class Americans helped nudge the First Command Financial Behaviors Index™ to 91, a one-point gain that nevertheless represents the highest quarterly finish of the past 15 months. This newfound optimism is surfacing amid increasing signs that the recession is ending and the economy is poised for a rebound.
“Many Americans are starting to see light at the end of the economic tunnel,” said Scott Spiker, CEO of First Command Financial Services, Inc. “Forty-one percent of Americans state that the economy has hit rock bottom and is on its way to recovery, an increase of 10 points from May.”
This positive view stands in welcome contrast to a recent decline in savings. In August, the personal savings rate fell for the third month in a row to 3 percent of disposable income, the Commerce Department reported Oct. 1. The First Command Financial Behaviors Index™ revealed a marked decrease in the amount of money Americans were able to put into short-term savings during August and September as the realities of unemployment and forced furloughs weighed heavily on family budgets.
The Index reveals that the average amount of money placed in short-term savings dropped 33 percent from $1,169 in July to $787 in August, and it remained low in September at $860. The drop was consistent across long-term savings and retirement accounts, though slightly less severe, with families decreasing long-term savings and retirement contributions by 20 and 21 percent, respectively.
While Americans reduced their monthly savings and investment contributions in the third quarter, their level of monthly short-term and long-term debt payments did not change significantly. At the same time, First Command Bank has experienced a sustained increase in applications for debt consolidation loans, providing further evidence that consumers are continuing to focus on paying off debt.
“During the past four months we have seen a rise in consumer interest in paying down revolving credit card debt,” said David White, president of First Command Bank. “We attribute this interest to the fact that we are one of the few banking institutions presently offering a low, fixed-rate debt consolidation loan.”
Also, Americans are continuing to cut back on spending. Fifty seven percent of survey respondents say they plan to spend less on holiday gifts again this year. Consumers say they will set a maximum dollar amount on gifts (42 percent), give fewer gifts to each person (41 percent) and give gifts to fewer people (39 percent).
“For many families, cutting back on holiday spending will be a key strategy for ensuring that they have sufficient dollars to follow through on their savings intentions,” Spiker said.
Throughout this recent ride of economic uncertainty, the Index has revealed that Americans with a financial plan feel better about their financial future than those without a financial plan. In September, only 25 percent of Americans without a financial plan were confident with their ability to retire comfortably, as compared to 41 percent with a financial plan. Similarly, only 27 percent without a plan felt extremely or very secure financially, while 40 percent of Americans with a financial plan had similar feelings of financial security.
“Our data has consistently shown that working with a financial planner helps families feel less stressed and more confident in their financial future,” Spiker said. “Furthermore, these findings are consistent with our experiences in the financial services industry. We see a disciplined approach to savings and debt in the lives of our clients who work with a First Command Financial Advisor and seek out savings and debt management solutions through First Command Bank. Perhaps the greatest value of these relationships is their ability to shape and encourage the types of lifelong financial behaviors that enhance financial well-being and long-term security.”
About the First Command Financial Behaviors Index™
Compiled by Sentient Decision Science, LLC, the First Command Financial Behaviors Index™ assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence. www.firstcommand.com/research
About Sentient Decision Science, LLC
Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index™. Sentient is a full-service market research firm with special vertical expertise within the financial services industry. Sentient specializes in advanced research design and statistical analysis of behavioral and attitudinal data.
About First Command
First Command Financial Services and its subsidiaries, including First Command Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through personalized financial plans that emphasize accumulating wealth while reducing risk, First Command Financial Advisors have established lasting relationships with hundreds of thousands of client families since 1958.
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First Command Financial Services, Inc. is the parent company of First Command Financial Planning, Inc. (Member SIPC, FINRA) and First Command Bank (Member FDIC). Financial planning services and investment products, including securities products are offered by First Command Financial Planning, Inc. Insurance products and services are offered by First Command Financial Services, Inc. Banking products and services are offered by First Command Bank. Securities products are not FDIC insured, have no bank guarantee and may lose value. In certain states, First Command Financial Services, Inc. is a separately registered domestic corporation and does business in California as “First Command Insurance Services.” A financial plan, by itself, cannot assure that retirement or other financial goals will be met.
A third-quarter surge in positive financial intentions among middle-class Americans helped nudge the First Command Financial Behaviors Index™ to 91, a one-point gain that nevertheless represents the highest quarterly finish of the past 15 months. This newfound optimism is surfacing amid increasing signs that the recession is ending and the economy is poised for a rebound.
“Many Americans are starting to see light at the end of the economic tunnel,” said Scott Spiker, CEO of First Command Financial Services, Inc. “Forty-one percent of Americans state that the economy has hit rock bottom and is on its way to recovery, an increase of 10 points from May.”
This positive view stands in welcome contrast to a recent decline in savings. In August, the personal savings rate fell for the third month in a row to 3 percent of disposable income, the Commerce Department reported Oct. 1. The First Command Financial Behaviors Index™ revealed a marked decrease in the amount of money Americans were able to put into short-term savings during August and September as the realities of unemployment and forced furloughs weighed heavily on family budgets.
The Index reveals that the average amount of money placed in short-term savings dropped 33 percent from $1,169 in July to $787 in August, and it remained low in September at $860. The drop was consistent across long-term savings and retirement accounts, though slightly less severe, with families decreasing long-term savings and retirement contributions by 20 and 21 percent, respectively.
While Americans reduced their monthly savings and investment contributions in the third quarter, their level of monthly short-term and long-term debt payments did not change significantly. At the same time, First Command Bank has experienced a sustained increase in applications for debt consolidation loans, providing further evidence that consumers are continuing to focus on paying off debt.
“During the past four months we have seen a rise in consumer interest in paying down revolving credit card debt,” said David White, president of First Command Bank. “We attribute this interest to the fact that we are one of the few banking institutions presently offering a low, fixed-rate debt consolidation loan.”
Also, Americans are continuing to cut back on spending. Fifty seven percent of survey respondents say they plan to spend less on holiday gifts again this year. Consumers say they will set a maximum dollar amount on gifts (42 percent), give fewer gifts to each person (41 percent) and give gifts to fewer people (39 percent).
“For many families, cutting back on holiday spending will be a key strategy for ensuring that they have sufficient dollars to follow through on their savings intentions,” Spiker said.
Throughout this recent ride of economic uncertainty, the Index has revealed that Americans with a financial plan feel better about their financial future than those without a financial plan. In September, only 25 percent of Americans without a financial plan were confident with their ability to retire comfortably, as compared to 41 percent with a financial plan. Similarly, only 27 percent without a plan felt extremely or very secure financially, while 40 percent of Americans with a financial plan had similar feelings of financial security.
“Our data has consistently shown that working with a financial planner helps families feel less stressed and more confident in their financial future,” Spiker said. “Furthermore, these findings are consistent with our experiences in the financial services industry. We see a disciplined approach to savings and debt in the lives of our clients who work with a First Command Financial Advisor and seek out savings and debt management solutions through First Command Bank. Perhaps the greatest value of these relationships is their ability to shape and encourage the types of lifelong financial behaviors that enhance financial well-being and long-term security.”
About the First Command Financial Behaviors Index™
Compiled by Sentient Decision Science, LLC, the First Command Financial Behaviors Index™ assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence. www.firstcommand.com/research
About Sentient Decision Science, LLC
Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index™. Sentient is a full-service market research firm with special vertical expertise within the financial services industry. Sentient specializes in advanced research design and statistical analysis of behavioral and attitudinal data.
About First Command
First Command Financial Services and its subsidiaries, including First Command Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through personalized financial plans that emphasize accumulating wealth while reducing risk, First Command Financial Advisors have established lasting relationships with hundreds of thousands of client families since 1958.
-30-
First Command Financial Services, Inc. is the parent company of First Command Financial Planning, Inc. (Member SIPC, FINRA) and First Command Bank (Member FDIC). Financial planning services and investment products, including securities products are offered by First Command Financial Planning, Inc. Insurance products and services are offered by First Command Financial Services, Inc. Banking products and services are offered by First Command Bank. Securities products are not FDIC insured, have no bank guarantee and may lose value. In certain states, First Command Financial Services, Inc. is a separately registered domestic corporation and does business in California as “First Command Insurance Services.” A financial plan, by itself, cannot assure that retirement or other financial goals will be met.