2019 Modern Wealth Survey

FOMO fuels American spending

More than a third of Americans admit their spending habits have been influenced by images and experiences shared by their friends on social media and confess they spend more than they can afford to avoid missing out on the fun, according to Schwab’s 2019 Modern Wealth Index Survey, an annual examination of how 1,000 Americans think about saving, spending, investing and wealth.

Survey respondents place blame on social media platforms and not people—they rank social media as the biggest “bad” influence when it comes to how they manage their money, while they put friends and family at the top of “good” influences.

According to the survey, three in five Americans pay more attention to how their friends spend compared to how they save, with an equal number saying they’re at a loss to understand how their friends are able to afford the expensive vacations and trendy restaurant meals they portray on social media.

The pressure to spend as a result of social media envy and the desire to not be left out of friends’ experiences is particularly acute among Generation Z and millennials, the survey found:


Financial decisions are influenced by friends’ showy social media feeds

  All Millennials Generation Z
Wonder how friends can afford expensive experiences posted on social media 60%      72%      74%
Pay more attention to how their friends spend versus save 57%      53%      61%
Spent more money than they can afford to participate in experiences with friends 35%      48%      41%
Influenced by social media to spend money on experiences 34%      49%      44%


“The burden to ‘keep up with the Joneses’ has been part of our culture for decades, but it appears that social media and the fear of missing out (FOMO) have increased the pressure to spend,” said Terri Kallsen, executive vice president and head of Schwab Investor Services. “Spending is not the enemy, but when we allow social pressure or other forces to lure us into spending beyond our means, it can impact long-term financial stability and become a larger problem.”

Despite the financial pressures lurking in their social media feeds, 59 percent of Americans consider themselves to be savers, and 65 percent say they’re willing to sacrifice spending money on experiences now to save money for later in life.

However, a significant number of Americans are still struggling to save:

  • Paycheck-to-paycheck

    A majority (59 percent) live paycheck to paycheck

  • Credit card debt

    Nearly half (44 percent) typically carry a credit card balance

  • Emergency fund

    Only 38 percent have built up an emergency fund

  • Non-essentials

    On average, they spend almost $500 a month on “non-essential items”

Planners demonstrate better money and investing habits

For those looking for a way to stay the course, Schwab’s survey shows that more than 60 percent of Americans who have a written financial plan feel financially stable, while only a third of those without a plan feel that same level of comfort. Those with a plan also maintain healthier money habits when it comes to saving:
 

Saving habits of planners vs. non-planners

  Planners Non-planners All
Pay bills and save each month 78% 38% 50%
Have an emergency fund 68% 26% 38%
Automate a portion of their income to go into savings 74% 25% 39%
Never carry a credit card balance and make other loan payments on time, or have no debt 45% 27% 32%


Planners also demonstrate good investing behavior:
 

Investing habits of planners vs. non-planners

  Planners* Non-planners* All*
Consider risk tolerance when investing 75% 56% 64%
Aware of fees and investment costs 74% 49% 60%
Regularly rebalance portfolio 85% 57% 69%
Feel ‘very confident’ about reaching financial goals 56% 17% 28%
Have a diversified portfolio 20% 9% 14%

*Among 2019 Modern Wealth Survey participants who say they have investment account


Additionally, more than half of planners (52 percent) are focused on how their friends save rather than spend money. In fact, 52 percent of planners say their friends actually motivate them to save and invest.

Despite the benefits of planning, Schwab’s survey shows that only 28 percent of Americans have a financial plan in writing. And among those without one, nearly half (46 percent) say it’s because they don’t think they have enough money to merit a formal plan, 18 percent say it’s too complicated, and 13 percent say they don’t have enough time to develop one.

MWI-Terri Quote

“We want to change the perception that financial planning is inaccessible, too expensive and too complicated. Most people have short-term and long-term goals, either in their heads or documented informally. We can help capture those ideas and create a plan to achieve them. It’s that simple.”

Terri Kallsen
Executive Vice President
Head of Schwab Investor Services

If I had a Million Dollars (Would I be Rich?)

According to the survey, Americans believe it takes an average $2.3 million in personal net worth to be considered “wealthy.” That’s more than 20 times the actual median net worth of U.S. households, according to the Federal Reserve’s Survey of Consumer Finances released in 2017.

More than half of Americans are optimistic that they will be wealthy at some point in their lives, and two in five believe they will achieve that goal within a decade. Eight percent say they already consider themselves wealthy, although their numerical definition of wealth is lower—they believe they achieved wealth at almost $700,000 in net worth.

Despite the high dollar amounts Americans use to define wealth, when it comes to feeling personally wealthy, 72 percent say it isn’t about a dollar amount at all, but rather the way they live their lives.

When asked what they would do with a sudden $1 million windfall, more than half (54 percent) of survey respondents say they would spend it—on a house first, followed by cars and travel. In addition, they say they would use the funds to pay down debt (28 percent), invest (23 percent) and save (21 percent). In comparison to other generations, Gen Z respondents were the most likely to say they would save at least a portion (37 percent).

  • House

    Housing and travel

    More than half (54 percent) would spend it—on a house first, followed by cars and travel

  • Reducing debt

    28 percent would use the funds to pay down debt

  • Investing

    23 percent would use the funds to invest

  • Saving

    21 percent would use the funds to save

About the Modern Wealth Survey

Schwab has created a Modern Wealth Quiz to help people gain insights about their own saving, spending, and investing habits. The brief, multiple-choice questionnaire is available at www.schwab.com/MyModernWealth.

To view the full results, click here.

The online survey was conducted by Logica Research from February 8 to February 17, 2019, among a national sample of Americans aged 21 to 75 and an augment sample of 200 older Gen Zers aged 18-22 for generational comparisons. The national sample was balanced to be demographically representative. The margin of error for the national sample is three percentage points.

About Charles Schwab

At Charles Schwab, we believe in the power of investing to help individuals create a better tomorrow. We have a history of challenging the status quo in our industry, innovating in ways that benefit investors and the advisors and employers who serve them, and championing our clients’ goals with passion and integrity. More information is available at www.aboutschwab.com. Follow us on Twitter, Facebook, YouTube and LinkedIn.

Disclosures

Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; compliance and trade monitoring solutions; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. Logica Research is not affiliated with the Charles Schwab Corporation or its affiliates.

More information is available at www.schwab.com and www.aboutschwab.com.

 

Investment Products: Not FDIC Insured • No Bank Guarantee • May Lose Value.

0519-9L6F