New York, December 4, 2009. Half of all US consumers would struggle to meet an unexpected financial crisis like sudden car or home repairs or minor health related expenditures according to the TNS Personal Risk Assessment and Risk Literacy Survey. US consumers also lack a basic understanding of financial risk.
The TNS Finance Personal Risk Assessment and Risk Literacy Survey is a consumer survey developed by TNS in association with professors from Harvard Business School and Dartmouth College. The survey analyzes nationally representative consumers across thirteen countries with respect to their risk literacy, household financial fragility, and financial experience and behavior during the economic crisis of 2008-2009.
No Financial Safety Net
To measure capacity for risk bearing, the survey probed if consumers could come up with enough money for a major car repair in a month. 46% of US consumers were unlikely to be able to find the funds. Younger people had the most difficulties with 55% of 16-24 year olds compared too 34% of 55-64 year olds unable to fund emergencies. Financial fragility directly correlates with salary levels however 24% of those earning $100,000-149,999 would still unable to find funds.
According to Peter Tufano of Harvard Business School, "These figures include more than just the unemployed or lowest income households. There is widespread financial fragility with a significant number of seemingly middle-class consumers extremely vulnerable to sudden financial emergencies."
Where to turn for help? Savings, credit or social networks?
While credit cards are ubiquitous, households don't expect to turn first to credit for emergencies. 49% of Americans would look to savings accounts first to fund an emergency. 27% said they would likely turn to their families for help and 21% would try to work overtime or get a second job. 20% would look to credit cards to tide them over in emergency - 18% are prepared to sell their belongings (not home).
Risk Literacy
After a financial crisis where risk was such an enormous factor, it is important to know if consumers have any real understanding of the basic principles of financial risk. TNS asked consumers to assess: the relative payout of two lotteries, the relative risk and returns from two investment funds, and the relative risk of investing in a single versus a basket of stocks.
In the US, respondent scores were higher than many country results but still very poor. Only 19% of men and 11% of women surveyed managed to answer all questions correctly (15% in the aggregate). The ability to answer these questions is related to general education with only 8 percent of high school graduates able to answer all questions correctly. However, even the highly educated didn't fare well with only 20% of those with a college degree and 30% with post-graduate degree able to answer the three questions correctly.
The older population - where people are more likely to be actively invested - also struggled with risk concepts. Only 12% of 35-64 year olds compared with 33% of the under 35s for all countries surveyed were able to answer the questions.
Trish Dorsey, SVP TNS Financial Services, sees an opportunity - and a real challenge - for the financial community to become engaged in educating consumers, "We think these data speak to a real need for financial services providers to develop simple solutions communicated with great clarity and empathy. In fact, we see many of our financial clients already developing educational materials to help their customers make more informed decisions about managing risk. It's a possibility that even the most well educated consumers, particularly women, may just disengage because they are too afraid to invest in products they cannot understand."
TNS Finance Personal Risk Assessment and Risk Literacy Survey is a consumer survey developed by TNS in association with Harvard Business School and Dartmouth College. The survey analyzes nationally representative samples of consumers across fifteen countries and regions with respect to their risk literacy, household financial fragility, and financial experience and behavior during the economic crisis of 2008-2009.
Survey Methodology
Fielded between June and September 2009. Countries and sample size: US (2148), UK (1001), Germany (1107), France (1097), Canada (1132), Italy (935), The Netherlands (1001), Mexico (904), Argentina (1000), Portugal (1011), Luxembourg (504), Hong Kong (1000), Singapore (1000), Saudi Arabia (453) and United Arab Emirates (400). Total sample size: 14693.
Samples are nationally representative of the general population in all countries but Mexico (main cities), United Arab Emirates (main cities, working population having a banking relationship) and Saudi Arabia (main cities, working males having a banking relationship). Methodology was online but for Argentina, Saudi Arabia and United Arab Emirates (face to face); and Mexico (telephone).
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About TNS
TNS, who recently merged with Research International, is the world's largest custom research agency delivering actionable insights and research-based business advice to its clients so they can make more effective business decisions. TNS offers comprehensive industry knowledge within the Consumer, Technology, Finance, Automotive and Political & Social sectors, supported by a unique product offering that stretches across the entire range of marketing and business issues, specializing in product development & innovation, brand & communication, stakeholder management, retail & shopper, and qualitative research. Delivering best-in-class service across more than 75 countries, TNS is part of Kantar, the world's largest research, insight and consultancy network. Please visit www.tnsglobal.com for more information.
The Kantar Group
The Kantar Group is one of the world's largest research, insight and consultancy networks. By uniting the diverse talents of more than 20 specialist companies - including the recently-acquired TNS - the group aims to become the pre-eminent provider of compelling and actionable insights for the global business community. Its 26,500 employees work across 80 countries and across the whole spectrum of research and consultancy disciplines, enabling the group to offer clients business insights at each and every point of the consumer cycle. The group's services are employed by over half of the Fortune Top 500 companies. The Kantar Group is a wholly-owned subsidiary of WPP Group plc. For further information, please visit www.kantargrouptns.com
