American families are stricken by fear about finances, but not enough to change their savings behavior, according to Bankrate’s new survey.

And although the markets have shaken their faith in certain bedrock financial principles, the American dream of homeownership remains alive and well.

Bankrate commissioned Princeton Survey Research Associates International to gauge the attitudes of Americans about finances and family life and discovered several surprises.

Among the findings:

  • About nine out of 10 (92 percent) survey respondents believe that a home is a good investment for the future. But nearly half (48 percent) of Americans worry about losing their home or being unable to afford the home they live in.
  • Americans are split about whether stocks and mutual funds are good long-term investments. Four out of 10 Americans (39 percent) don’t believe the stock market offers the best chance for long-term returns, while another 12 percent don’t know how they feel about stocks. But 49 percent do have faith in the market.
  • A whopping 70 percent of Americans are vexed about saving enough money for retirement, while 50 percent fret about their ability to afford college for a family member.
  • Most survey respondents (67 percent) would postpone having children to first establish their careers and finances, but three in 10 (30 percent) would consider not having children at all because of their financial burden on the household.
  • Six out of 10 Americans would put off or change their plans to marry someone if they discovered their betrothed had a lot of debt and bad credit. The same proportion (59 percent) says that if they were stuck in an unhappy marriage, they would not postpone divorce even if finances were tight. One-third (34 percent) say they would delay divorce.
  • Despite the much-publicized rise in the national savings rate, many Americans haven’t changed their savings habits. Just 17 percent have increased savings, while 44 percent are saving about the same amount as before and 36 percent save less. Among employed Americans, only 35 percent have adequate savings to weather a job loss lasting more than six months.

Home sweet investment?

Most Americans (92 percent) either strongly or somewhat believe that a house makes a good investment, contrasted with 49 percent of Americans who believe that equity investments, including stocks and stock funds, offer the best chance for good long-term returns.

Preferring homes as investments over the stock market seems off base, given their respective historical returns. A study to be published this fall in the Journal of Portfolio Management compares the average return of real estate investments with U.S. stocks and other asset classes.

The authors found that in the last three decades, the average annual return on residential real estate was 5.92 percent versus 12.33 percent for the stock market, as measured by the Standard & Poor’s 500.

“Over time, the stock market is more liquid with a higher rate of return, but in the short term much more volatile,” says Jack Clark Francis, professor of finance and economics at Baruch College and a co-author of the study called “Contrasting Real Estate with Comparable Investments, 1978-2008.”

Last fall the stock market proved just how volatile investing can be. The S&P 500 lost about 42 percent of its value between the end of August and Nov. 20, 2008. Bankrate’s Senior Financial Analyst Greg McBride says investors may have been frightened off by the market’s tumult.

“In the past 10 years, many investors have been burned by the stock market twice and have been scared out of equities as a result,” he says.

Yet why do so many Americans believe that homes are good investments, despite the hits taken lately by the real estate market? One-quarter of American homeowners are “underwater,” owing more on their mortgage than their homes are worth, according to Moody’s Economy.com. A report by Deutsche Bank predicts that number will nearly double to 48 percent before the housing recession ends.

Most Americans (77 percent) say insurance is an important way to ensure financial security. Yet most also express concern about having enough coverage themselves. More than half (53 percent) worry about having enough life insurance. Nearly two-thirds (65 percent) worry about having enough health insurance or funds to cover health care costs for their family. And six out of 10 (62 percent) express anxiety about having enough money or insurance to cover long-term care costs for an elderly family member.

“Most people are not selling their homes, so they don’t see the possible illiquidity that is in the market or any of the negatives that are on that side,” says Jeffrey D’Italia, senior financial professional at Firstrust Financial Resources in Philadelphia. “But they do see the negativity on the stocks and funds side because it is jammed down your throat on the nightly news.”

Also, people track their investments more closely than they follow the value of their home, and fluctuations in the account can feel threatening to their future security — particularly if they have invested too aggressively or don’t understand their investing strategy.

Though homes do offer some financial benefits, experts emphasize that they’re not the ideal investment vehicle.

“Houses are homes first and investments a distant second,” says McBride.

“Even then, housing is a long-term investment and not a get-rich-quick scheme. What makes homeownership attractive is that over time it can rebate some of the costs, unlike renting,” he says.

Stocks alluring to educated, affluent

Though 49 percent of the overall population says stocks offer the best chance at good long-term returns, 61 percent of college graduates have greater conviction in the market. Among older Americans, only 39 percent of those over 65 believe in it, versus 48 percent of youthful Americans, ages 18 to 29.

The aversion to stocks by retirement-age folks is understandable, given stock volatility. But it’s too bad the young feel that way because with a very long time to invest, they can most benefit from the stock market.

“That is the group that has the most potential and time to do investing. Their investing experience has probably been mostly negative,” says Lynn Mayabb, senior managing adviser at BKD Wealth Advisors in Kansas City, Mo. “That’s the only experience they have to go from: ‘I put money in the stock market and it went down.’ They haven’t seen the positive side of stocks yet.”

Stocks and stock funds offer the best chance for good long-term returns
Agree – Strongly or somewhat

D’Italia agrees.

“We tend to lose sight of our historical perspectives that stocks have performed very well for the past 85 years relative to all other asset classes. Sometimes the patience isn’t there when it comes to investing,” he says.

Higher earners are also more likely to trust the stock market to deliver good long-term returns. Sixty percent of those earning $75,000 or more trust the stock market, versus 43 percent of those earning under $30,000.

“The high-income earners and the highly educated understand the way you make money on equities is holding them for a long period of time,” says Gary Gilgen, a Certified Financial Planner at Rehmann Financial in Troy, Mich.

If you were planning to marry someone and later found out that they had a lot of debt and bad credit, would you delay or change your marriage plans or not?
Yes, would change

Marriage and family finances

People want to protect what they have and are skittish of those who might threaten their financial security. Because of that, debt could easily kill romance, according to Bankrate’s survey.

Americans report that they’re leery of tying the knot with a partner who has lots of debt and bad credit.

Overall, 60 percent of those polled say they would change or delay their marriage plans if they found out their intended had substantial debt and bad credit. More women than men would consider this a deal breaker — 69 percent versus 51 percent for men.

Women probably want security, Gilgen says.

“Women are built so cool and differently. Their No. 1 thing is family security. Debt problems would threaten that security,” he says.

People over 50 years old overwhelmingly agree that they would avoid getting involved with a debt-ridden partner with bad credit. Seventy-two percent say they would run the other way as opposed to 45 percent of those in the 18 to 29 age category.

Many young people are saddled with college loans at that age, so their expectations may be different than someone gearing up for retirement in 10 or 15 years.

Age or generational mores impacted family-related questions as well.

Nearly nine out of 10 people (87 percent) in the 18-to-29 age group are in favor of putting off having children until they’ve established a career.

The majority of Americans (57 percent) say credit cards are useful tools for most consumers. But four out of 10 disagree.

People over 50 are somewhat split on the priority of career over family life, with just 58 percent saying they would postpone having children for their career if they were young.

And even if they’re willing to put off starting a family temporarily, the majority of people — 67 percent — wouldn’t forgo having children altogether because of the economic impact on the household. But 30 percent say they would.

“Basically, it looks like people are willing to put off children but not, not have them,” says D’Italia.

“You’re not seeing a lot of people having a bunch of kids when they’re 21. They’re waiting until they’re older. That just seems to be where the mainstream is going,” he says.

Most Americans want kids and careers. Nearly two-thirds (65 percent) of Americans say they would pay for pricey day care in order to keep working.

The value of college

Most people (77 percent) believe a college education, regardless of cost, is the most important determinant of future success.

While college may be extremely important for getting ahead, people can still succeed without a degree.

“I can’t tell you the number of people I know that don’t have degrees that are out of work right now. A lot of the rank and file are getting eliminated, and if they don’t have a college degree, they have nowhere to go,” says Gilgen.

But a college degree isn’t the only prerequisite for success, he says. “Two of the most financially successful clients of mine don’t have college degrees. They have hundreds of millions of dollars and no college degree. So you never know,” he says.

Regardless of cost, a college education is the most important determinant of future success?

Believing college is the right choice for your children is one thing, but paying for it is quite another.

Half of those surveyed are worried, either very or somewhat, about being able to afford college for a family member.

However, age impacted the anxiety factor. Just 39 percent of those over 50 are concerned. But six out of 10 people between the ages of 18 and 49 are worried.

Not ready for emergencies, retirement

Has the financial crisis really affected the savings behavior of Americans? The much-publicized national savings rate surged recently, but how many Americans are actually stashing money into savings?

According to Bankrate’s survey, 44 percent of Americans say that they are saving about the same amount as they were before the crisis. Just 17 percent say they’re saving more, while 36 percent are saving less.

Are you saving more, less or the same amount as before the crisis?

“The savings rate is not a measure of how much individual households are saving. It is an aggregate measure that looks at the difference between disposable income and total spending. Directionally it is useful, but in terms of pegging the actual percentage households are saving, it is not,” says McBride.

“People who are good savers are more inclined to increase their saving, but people who have never saved are unlikely to change suddenly and start putting away money consistently,” he says.

Meanwhile, employed Americans were asked what would happen if they experienced a job loss that lasted longer than six months and unemployment compensation were discontinued.

Only one-third (35 percent) say they have enough emergency savings to cover their living expenses for six months if they lose their job.

Are you worried about saving enough money for retirement?
Total worried:

Another 15 percent say that they would have to borrow money from relatives to cover living expenses, while 21 percent say that they would have to withdraw money from their 401(k) or other retirement account.

Twenty-seven percent admit they just wouldn’t be able to cover their living expenses and could possibly lose their homes.

Similarly, Americans are generally unprepared for that longest period of joblessness — the one called retirement. Overall, seven out of 10 say they are worried about saving enough for their golden years. That number goes up to 80 percent for those in the 30- to 49-year-old age category.

“I think that is refreshing,” says D’Italia. “Hopefully it pushes people to do something about it. Not buying a lottery ticket, either,” he says.

Regardless of age, income or education, people are anxious about their finances, mostly about being prepared for the unforeseen or the inevitable.

Maybe our collective angst will spur some action toward creating a sound financial future — or maybe not.

Results are based on telephone interviews with a nationally representative sample of 1,001 adults, age 18 and older. The interviews were conducted from July 16 to July 19, 2009, under the direction of Princeton Survey Research Associates International. Interviews were conducted on both landline and cell phones using random digit dial (RDD) sample. Sample demographics were weighted to match population parameters derived from the Census Bureau’s 2007 Annual Social and Economic Supplement data. The overall margin of sampling error is plus or minus 4 percentage points for results based on the total sample, and plus or minus 5 percentage points for results based on employed adults. Results based on smaller subgroups are subject to larger margins of sampling error. In addition to sampling error, the practical difficulties of conducting surveys can also introduce error or bias to poll results. For full results and methodology, download this PDF.

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