Despite lack of understanding of the measure of inflation, majority of respondents report feeling significantly or moderately impacted by inflation, according to new survey from D.A. Davidson
D.A. Davidson & Co. today announced survey results revealing that the majority of respondents (68%) indicated that inflation has significantly or at least moderately impacted their ability to afford basic expenses such as groceries, rent/mortgage, car payments and gas since January 2021 (when inflation began to rise).
That said, only one third of respondents (33%) correctly identified the primary measure of inflation (Consumer Price Index) when given multiple choice options including other indicators such as income and wage growth/decline, interest rates, Gross Domestic Product, retail sales and unemployment rate.
“These findings underscore the critical need for financial education in our country,” said Andrew Crowell, Vice Chairman of Wealth Management at D.A. Davidson. “In the current market environment, we hear about inflation every day, but it is our responsibility as financial professionals to help our clients actually understand inflation and its impact on their personal finances.”
As indicated in the chart below, younger generations reported feeling a greater impact from inflation than older generations, and were least able to correctly identify the primary measure of inflation. While understanding of inflation improves with age, there is a clear need for financial education for individuals of all ages as indicated by the percentage of correct responses.
| |
Reported inflation has significantly or moderately impacted their ability to afford basic expenses |
Correctly identified the primary measure of inflation |
| Silent Generation (ages 77-84) |
43% |
64% |
| Baby Boomers (ages 58-76) |
57% |
52% |
| Gen X (ages 42-57) |
71% |
31% |
| Millennials (ages 26-41) |
78% |
22% |
| Gen Z (ages 18-25) |
74% |
13% |
Majority of People Are Experiencing Heightened Financial Stress Since Inflation Began to Rise
Over the last 15 months, 61% of respondents say they have experienced heightened worry, anxiety or emotional tension related to money, debt and upcoming or current expenses.
Millennials and Gen X most frequently reported experiencing increased levels of financial stress since January 2021: Retirees (48%), Silent Generation (35%), Baby Boomers (55%), Gen X (65%), Millennials (69%), Gen Z (58%).
Furthermore, 64% of individuals believe inflation will impact their ability to save enough money for retirement, and half of retirees (51%) said inflation will impact their ability to save/have enough money in retirement. Amid rising inflation and heightened levels of financial stress, financial professionals can help ensure appropriate asset allocation as individuals reported holding most of their money in cash (42%), stocks (35%) and real estate (21%).
Amid Heightened Stress, People Are Budgeting Appropriately
Respondents have cut back more on discretionary spending and prioritized saving for their long-term future over the last 15 months. 27% of individuals did not pause or reduce their retirement savings contributions during the pandemic, and only 14% of individuals are unsure when they will resume their contributions to their pre-pandemic contribution rate (if they have not already).
The top areas where respondents reported cutting back on include:
- Dining out (62%)
- Travel/vacation (49%)
- Entertainment events (e.g., concerts, sporting events) (46%)
- Clothing (46%)
- Monthly subscriptions (e.g., streaming services, gym memberships) (36%)
- Groceries (35%)
- Emergency fund contributions (21%)
- Retirement savings contributions (16%)
More than half of respondents (52%) say they have canceled a vacation or scaled back vacation plans this year due to inflation. Younger generations’ travel plans were impacted by inflation more than older generations: Silent Generation (32%), Baby Boomers (42%), Gen X (55%), Millennials (59%), Gen Z (56%).
Methodology
This Xcelerant Survey was conducted online by Directions Research. The survey was fielded from April 21-26, 2022, among a demographically balanced nationally representative sample of 2,090 U.S. adults 18 years of age and older.
About D.A. Davidson Companies
D.A. Davidson Companies is an employee-owned financial services firm offering a range of financial services and advice to individuals, corporations, institutions and municipalities nationwide. Founded in 1935 with corporate headquarters in Great Falls, Montana, and regional headquarters in Denver, Los Angeles, New York, Omaha and Seattle, the company has approximately 1,475 employees and offices in 27 states.
Subsidiaries include: D.A. Davidson & Co., a full-service investment firm providing wealth management, investment banking, equity and fixed income capital markets services, and advice; Davidson Investment Advisors, a professional asset management firm; D.A. Davidson Trust Company, a trust and wealth management company; and Davidson Fixed Income Management, a registered investment adviser providing fixed income portfolio and advisory services.
For more information, visit dadavidson.com.
The information in this communication has been obtained from sources we believe to be reliable, but we cannot guarantee its/their accuracy or completeness. Neither the information nor any opinion in the publication constitutes a solicitation or offer by D.A. Davidson or its affiliates to buy or sell any securities, options, or other financial instruments or provide any investment advice or service.