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
|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:
A majority (59 percent) live paycheck to paycheck
Credit card debt
Nearly half (44 percent) typically carry a credit card balance
Only 38 percent have built up an emergency fund
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
|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
|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.
“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.”
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).
Housing and travel
More than half (54 percent) would spend it—on a house first, followed by cars and travel
28 percent would use the funds to pay down debt
23 percent would use the funds to invest
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
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