Inflation sullies summer plans, investment risk, homebuyer satisfaction

Nearly half of Americans plan to travel this summer – a ten-point increase over last year – but an astounding 36% say they cannot afford to, with millennials leading the pack (40%) according to the latest Consumer Spending & Saving Index from Massachusetts Mutual Life Insurance Company (MassMutual). The quarterly survey contextualizes consumers’ financial angst amidst stock market instability and macro-economic trends outside of their control.

In addition to financial constraints, younger generations said climate concerns factored into decisions not to travel with Gen Z (42%), millennials (32%) and Gen X (28%) coming in stark contrast to Baby Boomers (13%). Of those who do not plan to travel this summer, saving money is a greater driving force than last year (38% Q2 2023 vs. 27% Q2 2022).

“Even though younger generations have more years to recover from financial stressors, they are anxious about inflationary pressures and interest rate hikes,” explains Paul LaPiana, head of MassMutual brand, product and affiliated distribution. “The good news is that they can take steps now to better secure their financial futures: commit to saving, spend responsibly, consider increasing contributions to retirement accounts whenever possible, and educate themselves about risk tolerance when it comes to investment portfolios.”

More Americans say they expect their summer spending to decrease relative to last year (14% Q2 2022 vs. 22% Q2 2023), reflecting the impact of recent economic events. Additional findings demonstrate:

The impacts of inflation (88%) and a potential recession (81%) remain the most pressing fears for Americans with younger generations feeling the most acute anxiety.

• A third of young Americans feel unprepared to manage their finances (33% of Gen Z and 36% of millennials).
• The solution for some is ChatGPT. 15% of Americans have used AI to make banking, investment or other financial decisions, with Gen Z (37%) and millennials (27%) leading the adoption. ChatGPT is the most used AI tool with 11% of Americans reporting having used it.

Inflation and interest rate pressures are crimping spending plans for many Americans.

• More Americans are citing interest rate increases as a negative impact on their personal finances than they did a year ago (53% Q2 2023 vs. 41% Q2 2022).
• Only a quarter of Americans with children are sending their kids to a summer program this year (25%). Of the families not enrolling their kids in a summer program, over a third blamed the steeper expense on inflation (38%).
• 45% of Americans plan to spend no money at all on weddings this year; of those that plan to spend money, 48% plan to spend less than $500.

Anxious about rising housing costs, some Americans now regret buying a new home.

• 70% of Americans are concerned about the impact of increased housing costs, and 52% believe it will have a negative impact on their personal finances.
• Concern over rising housing costs is putting a steady squeeze on daily finances, (46% in Q2 2022 vs. 60% Q2 2023). Younger generations (77% Gen Z, 77% millennials and 65% Gen X) drove this sentiment with Baby Boomers (39%) and the Silent Generation (34%) showing less anxiety.
• Of the 9% of Americans that express regret in a recent home purchase or home improvement, 44% say their purchase had a significant impact on their daily finances.

Rising costs are affecting investment decisions and risk tolerance. Among Americans investing less this quarter versus the same time last year, more people cite rising costs (43% Q2 2022 vs. 63% Q2 2023).

• Despite having more time to recover from financial loss, younger generations are the most risk averse with 38% of millennials investing in lower-risk investments compared to 22% last year. Additionally, for Gen X, 39% are moving to lower-risk positions compared to 31% this time last year.

Although younger generations are more likely to prioritize financial security over a secure relationship, few have retirement accounts set up.

• Gen Z (74%), millennials (69%) and Gen X (64%) would rather have financial security than relationship security, while Baby Boomers and the Silent Generation are split on which is more important to them.
• Younger generations are less likely to have an individual retirement account (Gen Z 16%, millennials 24% and Gen X 29%) compared to Baby Boomers (54%) and the Silent Generation (53%).

Ahead of potential changes to recent student loan forgiveness legislation, more Americans are worried about the impact on their financial futures.

• The resumption of federal student loan payments is very concerning to an increasing number of Americans compared to last quarter or this time last year (40% Q2 2023, 34% Q1 2023 and 27% Q2 2022).

When asked about credit scores, only 40% of Americans correctly selected payment history as having the biggest impact.

• Older generations tended to attribute payment history as the most significant impact to their credit score compared with younger age groups (52% Baby Boomers, 55% Silent Generation, 30% Gen Z, 32% millennials and 36% Gen X).

“The latest findings from our Consumer Spending & Saving Index reinforce what MassMutual gleans from its policyowners: the financial challenges and opportunities faced by Americans today are complex and unrelenting,” says LaPiana. “Understanding your unique financial situation, your assets, liabilities and financial goals and putting thoughtful plans and financial backstops in place will set you up to effectively navigate uncertainty and be poised to benefit from future opportunities.”

Methodology

The MassMutual Consumer Spending & Saving Index tracks financial outlooks and behaviors in a changing economic environment. It offers an in-depth snapshot of people’s saving and spending behaviors and examines sentiment and attitudes toward navigating the changing state of the economy with an emphasis on inflation, spending and changes in interest rates. Commissioned by MassMutual, the research was conducted online by PSB Insights from May 1-16, 2023, among a nationally representative sample of 1,000 U.S. adults (ages 18+) as well as an additional sample of 500 adult Massachusetts residents.

Links to prior indexes:

About MassMutual

MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyowners. Founded in 1851, the company has been continually guided by one consistent purpose: we help people secure their future and protect the ones they love. With a focus on delivering long-term value, MassMutual offers a wide range of protection, accumulation, wealth management and retirement products and services. For more information, visit www.massmutual.com.

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