Despite rating their financial decision-making abilities highly, a majority of middle-class Americans reported making at least one really bad decision in the past that cost them an alarming amount of money on average.
Despite rating their financial decision-making abilities highly, a majority of middle-class Americans reported making at least one really bad decision in the past that cost them an alarming amount of money, according to a report from the Consumer Federation of America.
Unless faced with a complex issue, like saving and investing or purchasing a mortgage, middle-class Americans rate their financial decision-making ability highly, according to the report. Most rate their abilities as “excellent” or “good” when it came to budgeting income (81%), managing credit card debt (80%) and purchasing auto insurance (83%). In these areas, they were less likely to seek information or advice.
However, middle-class Americans were less confident about saving for retirement (63%), purchasing a mortgage loan (67%) and purchasing life insurance (66%). The more complex the financial issue, the more likely they were to use information or advice from a financial professional.
The majority of middle-class Americans (67%) reported that they had made at least one “really bad financial decision” in the past, and half of those respondents admitted that they had made more than one bad decision. The estimates for dollars lost as a result of these decisions were widely varied: 11% said loses had been at least $50,000 and 2% said they had been $200,000 or more. The median response was $5,000, but the average response was $23,000.
This is a delicate time for middle-class Americans. They earn less today than a decade ago, and only slightly more than two decades ago. They make up 40% of all households and have incomes between $35,600 and $94,600.
Not only has the recession hurt their income, but middle-class Americans faced a lot of job insecurity. As a result, they showed they would be conservative with investments. The same amount would invest $1 million in a savings account (19%) as stocks and bonds (21%). A quarter would invest that money in real estate and a small minority (6%) in gold or precious metals.