By Quentin Fottrell, MarketWatch
Ten years have come and gone so fast, but the lessons of the financial crash remain.
People are saving more, but may be investing less. Of those who say they were affected by the Great Recession, 65% say they have still not fully recovered, according to a recent survey of 2,000 adults by online investing company Betterment, and 41% of them have no retirement savings strategy. “Ten years after the crisis, most consumers remain deeply distrustful of Wall Street and are still working to recover financially,” the report found.
‘Ten years after the crisis, most consumers remain deeply distrustful of Wall Street and are still working to recover financially.’
“But there’s hope in the youth: Despite graduating into one of the toughest job markets in decades and seeing the real-time effects of the crisis, as well as being first-time or new voters amid controversial government involvement in bank bailouts, younger generations are the most trusting of and optimistic about Wall Street’s future.” (A Gallup survey released last year found that 62% of Americans owned stocks from 2001 to 2008, but that fell to 54% between 2009 and 2017.)
Roughly half of the survey’s participants were investing in the stock market 2008 and almost all of them lost money, the report found. “Yet, those who saw those effects on their portfolio and still rode out the storm are more than twice as likely to report feeling like they’ve fully recovered, and are investing and saving more than their non-investing counterparts,” it added.
Here’s what else the survey found:
• Nearly 30% make a concerted effort to save more today than in 2008.
• Only 10% of people said they invest more today than they did in 2008.
• However, 66% said they invest less today than they did a decade ago.
• 83% don’t think Wall Street is more ethical than it was before the crisis.
• 1 in 4 people stopped saving for retirement or contributing to their 401(k).
People remain worried there will be another financial crisis in the next 10 years, the report added. Some 27% of investors who saw their portfolios dip 10 years ago think it will happen again sooner rather than later, yet 61% still have more than $10,000 invested in the market in 2018. Most worrying for the authors of the report: Of those who were not investing in 2008 — roughly half of respondents — 87% are still not investing today.
“The news reports about markets are biased towards fear and negativity: crashes are newsworthy, but steady growth isn’t unless it’s to stoke fear of another crash,” Dan Egan, vice president of Betterment’s behavioral finance and investments, wrote in the report. He added, ““The data reinforced a lot of what we already feel and see on Wall Street: People are slow to trust big banks again, and understandably worried this will happen again.”
Meanwhile, people are racking up debt again. Last year, Americans had $1 trillion in outstanding revolving debt, which is often characterized as credit-card debt, according to the Federal Reserve . That figure also recently surpassed the record-high level of $1.02 trillion reached in April 2008 after falling to $837 billion in 2011. Student debt now exceeds $1.5 trillion amid stagnant wages and a slow recovery in the housing market, up from approximately $671 billion at the beginning of 2008.
During the economic downturn a decade ago, Generation X homeowners — born between 1965 and 1980 — experienced the largest decline in home equity, a recent report by the Pew Research Center, a Washington, D.C.-based think tank, found. Home equity for that generation of homeowners fell 43% from $66,000 in 2007 to $37,600 in 2010. The median value of the financial assets owned by Generation X households fell 20% from 2007 to 2010.
Since 2010, the median net worth of Generation X households has risen 115% and, since 2016, the net worth of a typical Gen X household had surpassed what it was in 2007 ($84,200 versus $63,400). “As of 2016, the median wealth of households headed by Boomers and the Silent Generation remains below 2007 levels, though their household wealth still exceeds that of Generation X,” wrote Richard Fry , a senior researcher at Pew.