Americans are feeling optimistic about their financial futures, with many believing they are in a better position to reach their financial goals compared to previous generations, according to Charles Schwab’s eighth annual Modern Wealth Survey.
The report, which examines how people in the United States think about saving, spending, investing and wealth, found that more than 60% of respondents across different regions feel more confident about achieving their financial objectives. This optimism can be attributed to improved financial technology, increased access to investing and more diverse ways to build wealth.
Moreover, the analysis revealed that a majority of Americans are currently investing, with younger generations starting at an earlier age. Nearly half of the respondents believe they are enjoying a better lifestyle than their parents did at the same age and feel more skilled at managing their investments.
Confidence in investing strategies is high across generations, with the availability of financial advice and knowledge, along with the ability to easily research companies and investments, cited as top reasons for increased investment optimism.
Despite the cheerful outlook, respondents said the high cost of living and housing prices are primary roadblocks to meeting their financial goals. Additionally, less than a quarter of Americans feel they are currently “on top” of their finances.
However, when it comes to personal finance skills, many respondents gave themselves high grades in areas such as debt management and spending within their means.
The survey found that those who have established financial plans tend to rate themselves higher in various aspects of financial management, including savings, investments and retirement preparedness.
The Magic Number
The Modern Wealth Survey also provided insights into the national perception of wealth. Americans, on average, believe a net worth of $2.5 million is required to be considered wealthy in 2024, up 14% from $2.2 million in the previous year. For financial comfort, the national average is $778,000, down from $1 million the previous year.
The Number Varies By Location And Age
The threshold varied significantly by generation and geographic location, with Baby Boomers and residents of high-cost areas, like San Francisco, setting higher benchmarks for wealth.
In the San Francisco Bay Area, residents believe a net worth of $4.4 million is needed to be considered wealthy. This is 43% higher than the national average. To feel financially secure, San Franciscans say a net worth of $1.5 million is required.
For Southern California, including Los Angeles and San Diego, the threshold to be considered wealthy is $3.9 million, which is 26% higher than the overall national average. To feel economically stable in Southern California, a net worth of $1.2 million is needed.
In terms of generations, Baby Boomers believe the wealth threshold is $2.8 million, whereas Gen-X places it at $2.7 million. Notably, Millennials have a lower threshold of $2.2 million, and Gen-Z considers $1.2 million to be the lowest threshold for wealth.
Financial Goal Setting
Only 36% of Americans have a documented financial plan, according to the Charles Schwab research. Among those with a plan, nearly all (96%) express confidence in their ability to achieve their financial objectives.
The primary obstacle for Americans without a financial plan is a lack of sufficient funds, while Gen-Z is hindered by the belief that creating a plan is too complicated.
One of the most common financial goals Americans are working toward includes creating a practical budget, with about 13% identifying better budgeting as their primary goal for 2024, Bankrate data shows.
People are also prioritizing saving more money (15%), particularly for emergencies, while paying off debt remains a major goal for many, especially given the high levels of credit card debt nationally.
Saving for retirement is another critical objective, as many Americans aim to identify their retirement needs and either start or increase their retirement savings.
In a Bankrate Financial Security survey, 74% percent of respondents said they view homeownership as the pinnacle of the American Dream, and many are focused on saving for a house down payment.
In today’s economy, financial success is not defined by being a millionaire, but rather by enjoying a comfortable lifestyle, according to nearly 60% of Americans. This can be achieved through increasing earning potential through career advancement or education.
Source: Forbes
