MacroMonitor Market Trends August 2011

MacroMonitor Market Trends is a newsletter from Consumer Financial Decisions that highlights topical news and trends of interest to you and your colleagues. If you would like more information about the topic in the newsletter or would like to discuss other ways that we can assist you in your research and marketing efforts, please contact us.

Uh-Oh! Are Basic Financial Needs Being Met?

CFD newsletters typically address marketplace trends for financial services. The August 2011 edition presents the foundation for a future trend.

The events of the past several years have raised two fundamental questions:

  • What are the basic financial needs of US households in the postcrisis environment?
  • How well are these needs being met?

The 2010–11 MacroMonitor's new question about financial needs measures the relative consumer importance of 24 specific needs. A corresponding question measures how well these needs are met. On the basis of data gathered between June and August 2010, the table shows the nine top-rated financial needs for CFD's Life Stage segments. CFD rates each "need" using households' responses to a four-point scale from not at all important to extremely important. The following table displays needs in descending order on the basis of the combined weighted-average rank of top-box (extremely important) response incidences for all households in each of the eight Life Stage segments. A rank of 1 means the need is of the top-most importance, a 2 indicates the need is of second-most importance, and so forth. For inclusion in the table, each need has a rank of 10 or higher for six or more Life Stage segments.

Importance of Financial Needs to Household
(Weighted Average Response Incidence)

Need (In Order of Importance to All US Households) Single No Kids (Rank) Married No Kids (Rank) Oldest Child 0—11 (Rank) Oldest Child 12—17 (Rank) Oldest Child 18+ (Rank) Preretired (Rank) Younger Retired (Rank) Older Retired (Rank)

Base: All US Households

Source: 2010–11 MacroMonitor

Saving money for use in the distant future 1 4 4 5 3 3 9 9
Accessing account information 3 1 5 7 6 8 5 5
Minimizing basic monthly expenses 6 2 1 2 9 7 7 8
Protecting against financial crimes 11 10 8 4 7 1 1 2
Replacing sufficient income if wage earner dies 8 6 3 1 1 10 10 12
Protecting against loss of savings or investments 9 14 9 12 4 2 2 1
Replacing sufficient income if wage earner becomes disabled 4 5 7 3 5 6 14 10
Accessing cash 2 9 6 9 8 11 6 6
Saving money for use in the near future 5 3 2 8 10 9 8 13

A distinctly emotional tone is inherent in needs that dominate in the postcrisis economy. For example, saving (as opposed to investing) for use in the distant future is clearly the most important consumer need. The relative importance of this need for saving among the Life Stage segments is not as high a priority for households with young children or retirees as it is for single-headed households with no kids, households with children 18 years of age or older, and Preretired households. "Accessing account information" is the second-most important need—hardly surprising in times when trust and confidence in financial institutions is low. Young households with no children (couples, in particular) are the most concerned about accessing their accounts.

The need to minimize expenses is concentrated among young couples, regardless of the presence of children. Protection against financial crimes ranks high among the needs of households with a primary head older than age 45 and no dependent children: the Preretired, Younger Retired, and Older Retired Life Stage households. Loss of income ranks highest among households with children. "Protecting against loss of savings and/or investments" is most important for mature Life Stage segments.

Comparisons of financial needs and the usefulness of existing products and services prompt some interesting questions. For example, will the markets for life and disability insurance expand in proportion to the importance of the needs? A gap analysis of product need with product usefulness will result in direction for business opportunities.

The key to understanding the gaps between needs and how well each need is currently met is a broad picture of each segment's competing demands on household finances within the context of its resources and attitudes. A multitude of competing interests affect the importance of needs at different stages of life. The MacroMonitor supplies this comprehensive perspective.

To learn about how well all 24 financial needs are being met, contact CFD.