Despite the economic slowdown, more Americans are saving up for a new car or big vacation than putting money away for their kids’ college education, according to a survey released this week by America’s financial planners.
“People today may be more inclined to put their economic security at risk to ‘keep up with the Joneses’,” the report reads. “The only area where families are more prone to save [than 15 years ago] is toward a major purchase, like a new car, vacation, or home improvement project.”
The survey, from the Certified Financial Planners Board of Standards and the Consumer Federation of America, compared attitudes about household finances today with sentiments in 1997, when the United States was enjoying an extended stock-market boom.
Specifically, 60 percent of respondents are saving for a major purchase today, compared with 52 percent in 1997.
Despite the soaring cost of a college education, “fewer of those in families with a college-bound child have started to save for college education,” the survey noted, by 48 percent today, versus 56 percent in 1997.
"We have seen this in recession eras before," says Larry Hugick, chairman of Princeton Survey Research Associates, which conducted the interviews with 1,508 financial decision makers over two weeks in May. "People want to give themselves some sort of treat. They want their vacation."
Hugick also speculated that short-term goals, like a new car or vacation may seem attainable by comparison to college expenses. The rapid rise in tuition in recent years has seemed to dwarf the most conscientious saver’s account balance, and Americans wouldn't be blamed for feeling hopelessness toward covering their children’s college expenses.
Tight credit may also skew consumers' savings plans.
"It could be that people are saving for major purchases, like a car, that they would previously have used credit to buy," says Dan Drummond of the Certified Financial Planners Board. "It just shows that people still need help saving toward major goals."
Indeed, the financial planners’ study puts some of their findings to lower incomes and tight credit.
Overall, fewer Americans reported saving toward any goal, 80 percent, than did in the salad days of the ‘90s.
“With less money to go around…fewer report saving for emergencies, leaving their family more vulnerable to the upheaval caused by a job loss or major unexpected expenses,” the survey says.
Fifty-two percent of those responding to the survey considered themselves behind when it came college savings; 42 percent say they feel good about their college accounts. Only thirty-eight percent feel as if they are behind on putting money away for that major purchase.
Not surprisingly, more Americans today—about 38 percent—said they were living paycheck to paycheck than said they were financially comfortable (30 percent). In 1997, those numbers were basically reversed.
Nearly a quarter (23 percent) of those reached for the survey say they owe more on their house than they could sell it for, and more than a third don’t expect to retire before they turn 65. Half of Americans planned an early retirement in 1997.