Consumers' Financial Confidence is up, Along with Increased Impulse and Excessive Spending

Published: 08 Sep 2021

As the U.S. continues to make its way through the pandemic, a majority (51%) of Americans believe they are making real financial progress. However, trends from BMO's Real Financial Progress Index, a quarterly measurement of consumer sentiment about money, point to increases in consumer confidence potentially leading to negative behaviors that could undo consumers' financial progress. These findings are from the latest BMO Real Financial Progress Index, conducted by Ipsos. The national survey sampled adults aged 18+ in the U.S. from July 13 to Aug. 2.

Overall, the survey data showed American adults are experiencing steady increases in confidence about their current financial situation, which is driving an optimistic outlook for many:

● 4 in 5 (80%) of respondents are positive about their current financial position.

● Chicago area residents in particular report increased confidence levels – 81% up from 73% in April.

● Half of US adults (50%) see themselves as more financially secure than last year, consistent with findings in January and April.

● Most Americans report they know what they need to do to improve their finances (82%) and feel they have enough savings to get through an unexpected emergency (72%).

However, this increase in confidence and optimism is also correlated to a general decline in good financial decision making and negative spending behaviors. The survey revealed slippage on a number of important financial dimensions:

● Financial Planning: While nearly three in four Americans (72%) still set financial goals, financial planning has hit a plateau. The most significant drop occurred among Gen Z (ages 18-24,) with those setting financial goals declining from 80% to 74% from January to now.

● Excessive Spending: Additionally, the survey revealed increases in excessive spending and activities that can worsen one's financial situation up five points nationally to 50% since April, with the largest jump being from those in the 35-44 age group, which is up from 59% to 69%.

● Impulse Spending: Since April 2021, there has been an uptick in many Americans saying they do things that "worsen their financial situation" (e.g. impulse purchases, carrying more consumer debt, overspending, etc.). These negative financial behaviors rose across many age cohorts with those ages 25-35 up to 63% from 53%; ages 35-44 jumped to 62% from 55%; and ages 55-64 up from 21% to 30%.

"While it's encouraging that many Americans are feeling confident they're accomplishing real financial progress, we want to ensure their progress is sustainable through the economic recovery," said Paul Dilda, head of consumer strategy for BMO Harris Bank. "Consumers should continue to focus on the long term while the economy is good to continue the progress many made last year. They can work with their bank or other trusted financial advisor to ensure they don't unintentionally slow their financial momentum."

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