Middle class cautiously optimistic about achieving the American dream but overestimating their financial security

New pulse survey from CUNA Mutual Group reveals disconnect between middle class’s aspirations and resources

MADISON, WI (November 13, 2018)The middle class believes their ability to achieve the American Dream remains alive, but their own assessment of their financial security suggests they may be too optimistic, according to a new survey from CUNA Mutual Group, the leading provider of lending, insurance, investment and financial technology solutions for credit unions.

The survey finds that middle class Americans tend to feel positive about their prospects for upward mobility. When asked to grade the ability of the middle class to achieve the American Dream, the average response was B-.

This somewhat sunny outlook is further supported by respondents’ assessment of their financial security: 62% say they feel somewhat or very confident about their personal financial situation, and nearly half (46%) believe it is very unlikely that they will miss a loan payment over the next one to two years.

This cautious optimism, however, belies a more troubling financial picture: More than half of respondents are ill-equipped for an emergency, with 23% saying they have no emergency savings and 30% saying they only have one to three months’ worth.

“The middle class continues to experience stress from the long-term impacts of the 2008 recession,” said Steve Rick, Chief Economist at CUNA Mutual Group. “Markets may be rebounding and unemployment at historic lows, but we’re still seeing middle class families struggle with sticky wages, inadequate liquidity, high debt, insufficient savings and difficulty building wealth. This population is among the most exposed to an eventual downturn.”

Additional findings include:

Retirement remains a vulnerable spot

Few survey respondents feel prepared for retirement, with only 28% saying they’ll be able to retire with financial confidence in their lifetime. In fact, many seem to be more focused on short-term goals considered hallmarks of the American Dream: 38% say they feel they’ll be able to buy a new car in their lifetime, and 37% say they’ll be able to travel internationally.

A lack of financial literacy education and support may be driving this lack of long-term preparedness. According to another CUNA Mutual Group survey of retirement plan participants earlier this year, understanding available tools and resources and learning how to budget and manage debt are key areas where employees seek more information to better achieve their retirement goals.

Millennials most likely to forego the traditional American Dream

Sentiments among participants generally remained consistent across age, ethnicity, gender and other demographics. However, Millennials showed significant divergence from overall trends when it came to many of the traditional components of the American Dream:

  • 49% have put off buying a home, compared to 29% of the general population
  • 31% have put off higher education, compared to 17% overall
  • 23% have put off starting a family, compared to 9% overall

Delaying some of these key life milestones may be contributing to a better sense of financial wellbeing, including their prospects for retirement: Nearly two-thirds feel very or somewhat confident about their current financial situation, and 33% believe they will be able to retire comfortably. The gap between financial security and emergency savings, however, once again reveals a disconnect: 62% say they have three months or less of savings.

“A vibrant middle class is essential to a healthy, functioning economy and nation,” added Rick. “But we’re seeing a troubling picture emerge as their ability to manage their finances in the near term is coming at the expense of the long term. No one can control the economic winds, but the financial industry can provide the resources the middle class needs to break out of the cycle of economic insecurity.”

The 2018 CUNA Mutual Group survey polled 1,258 U.S. adults ages 18 or older and making an annual income of $35,000 to less than $100,000. The survey was fielded in August 2018.

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Allison Fanney

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