Consumers Still Wary Of Risk, 10 Years After Recession

What did consumers learn from the Great Recession of 2008-2009? A survey says the financial downturn led more Americans to adopt less risky financial behaviors, and they are still risk-averse a decade later.

The 10^th annual Northwestern Mutual Planning and Progress study shows that Americans learned some lessons from the recession and used those lessons to work on improving their financial security – in particular, carrying less debt.

The survey showed Americans’ overall feelings of security have improved since the financial crisis. Seven out of 10 said they feel financially secure today, compared with only 47% who reported feeling secure a decade ago. Nearly 90% said their financial habits are better now, and 74% said they carry less debt.

The first study, taken in 2009, showed Americans were wary of taking on financial risk as the recession eroded consumer confidence, said Emily Holbrook, director of planning at Northwestern Mutual. Today, Americans are still cautious about their finances, she said.

That caution has led consumers to take steps to improve their financial situation, she said, such as eliminating debt. However, she said, consumer optimism about their financial futures remains about the same in 2019 as it was at the tail end of the recession.

In 2009, 65% of those surveyed said they believed they were on track to achieve their financial goals. That percentage remained the same in the 2019 survey.

“People are telling us they are taking the right steps to carry less debt, become more frugal and set more financial goals,” she said. “But the financial trauma Americans experienced during the recession led to a kind of caution. They’ve been able to gain control over in the way they’re managing their finances. But looking across America as a whole and the system as a whole, there’s that real balance between caution and optimism.

"So I think it’s creating this flat sense of optimism. People feel they are taking the right steps to gain control over their finances but, given what they’ve seen over the last 10 years, they’re more cautious and less comfortable taking risks.”

Risk aversion was one theme that came out of the study results. When asked how they felt about taking on risk today compared with how they felt 10 years ago, 37% of respondents said they are less comfortable taking risks compared with 18% who said they were more comfortable.

Risk aversion extended to more than just financial risk. More than one-quarter (26%) of adults said they are less comfortable taking career risks and 35% said they are less comfortable taking risks with their health coverage.

“So you are seeing a shift toward a more cautious group of people, given what they have seen over the past decade,” Holbrook said.

Finally, the study examined consumers’ views on what success and the American dream look like to them. Holbrook said the top five answers were unchanged between 2009 and 2019.

“Those answers were focused on family, relationship, health versus material possessions, career and wealth. The one financial element that pops up in the top five was being prepared for the future,” she said.

“What I love about these answers is that people believe it’s less about what’s in your bank balance or what your income is, but it’s more about that level of preparedness, that being a critical element of success.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com. Follow her on Twitter @INNsusan.

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