Financial confidence improves, but ironically savings rates are in a decline. Despite inflation, a looming recession, and the lingering impacts of the Covid-19 pandemic, Americans are feeling confident about their finances. That’s according to new research from Northwestern Mutual, cited in a recent article in BenefitsPro.
The firm’s 2022 Planning & Progress Study, which included responses from 2,381 American adults, found that:
- 60% said the pandemic affected their finances
- 43% said they’ve fully recovered from all financial losses
- 30% said they haven’t recovered from all financial losses
- 73% said their financial habits improved due to the pandemic
- Two-thirds said they are or will become financially secure
Even though financial confidence improves – personal saving rates have declined since last year. Northwestern Mutual’s study found that average personal savings in 2022 was $62,000, compared to $73,000 in 2021. As it turns out, fewer Americans report developing healthy financial habits, like reducing their living expenses and paying off debt.
As to why Americans’ savings rates have declined, the BenefitsPro article quoted Northwestern Mutual executive vice president Christian Mitchell from a press release about the 2022 study: “‘There could be several factors contributing to the drop in savings from last year ranging from spiking inflation to people spending more as they resume some sense of normalcy in their lives…But it bears watching because while people say they plan to continue saving at an elevated rate going forward, intentions don’t always follow through to action.’”
Financial confidence improves as concerns about inflation and the economy continue to weigh on Americans’ minds. This is especially true when it comes to workers’ perception of their ability to retire comfortably, if at all. According to the report, one-third of Americans believe inflation will last beyond 2022, and less than half would call the economy strong. What’s more, respondents say inflation and the economy are major concerns for their retirement.
Having a financial plan may help increase financial confidence. According to the Northwestern Mutual report, those working with a financial advisor were less anxious about their finances and tended to sleep more soundly at night. According to Mr. Mitchell, there is a “pretty distinct link between financial wellness and overall wellness.”
Northwestern Mutual’s research also found that younger individuals, particularly Millennials and Gen Z, tended to be more anxious about their finances. However, that may change, as 18% of all survey respondents said they started working with a financial advisor since Covid-19 began. Those figures are higher for Millennials (24%) and Gen Z (29%), which may help bolster their financial confidence and financial wellness moving forward. The findings suggest more young people are seeking financial assistance and advice.
Despite the fact that financial confidence improves, more Americans appear to be proactively seeking advice when it comes to managing their money. Employers should encourage workers to consider working with their retirement plan’s financial professional, if offered, to get access to more personalized financial assistance. Employers should also consider providing or ramping up financial wellness offerings where budgets allow to help improve savings behaviors, retirement plan deferrals, and overall financial security.
