How FOMO Fuels American Spending: Our Financial Decisions Are Influenced by Friends’ Social Media Feeds

SAN FRANCISCO–(BUSINESS WIRE)–More than a third of Americans admit their spending habits have been
influenced by images and experiences shared by their friends on social
media and confess they spend more than they can afford to avoid missing
out on the fun, according to Schwab’s 2019
Modern Wealth Survey, an annual examination of how 1,000 Americans
think about saving, spending, investing and wealth.

Survey respondents place blame on social media platforms and not
people—they rank social media as the biggest “bad” influence when it
comes to how they manage their money, while they put friends and family
at the top of “good” influences.

According to the survey, three in five Americans pay more attention to
how their friends spend compared to how they save, with an equal number
saying they’re at a loss to understand how their friends are able to
afford the expensive vacations and trendy restaurant meals they portray
on social media.

The pressure to spend as a result of social media envy and the desire to
not be left out of friends’ experiences is particularly acute among
Generation Z and millennials, the survey found:

“The burden to ‘keep up with the Joneses’ has been part of our culture
for decades, but it appears that social media and the fear of missing
out (FOMO) have increased the pressure to spend,” said Terri
Kallsen, executive vice president and head of Schwab Investor
Services. “Spending is not the enemy, but when we allow social pressure
or other forces to lure us into spending beyond our means, it can impact
long-term financial stability and become a larger problem.”

Despite the financial pressures lurking in their social media feeds, 59
percent of Americans consider themselves to be savers, and 65 percent
say they’re willing to sacrifice spending money on experiences now to
save money for later in life.

However, a significant number of Americans are still struggling to save:

• A majority (59 percent) live paycheck to paycheck
• Nearly half (44 percent) typically carry a credit card balance
• Only 38 percent have built up an emergency fund
• On average, they spend almost $500 a month on “non-essential items”

Planners demonstrate better money and investing habits

For those looking for a way to stay the course, Schwab’s survey shows
that more than 60 percent of Americans who have a written financial plan
feel financially stable, while only a third of those without a plan feel
that same level of comfort. Those with a plan also maintain healthier
money habits when it comes to saving:

Planners also demonstrate good investing behavior:

Additionally, more than half of planners (52 percent) are focused on how
their friends save rather than spend money. In fact, 52 percent of
planners say their friends actually motivate them to save and invest.

Despite the benefits of planning, Schwab’s survey shows that only 28
percent of Americans have a financial plan in writing. And among those
without one, nearly half (46 percent) say it’s because they don’t think
they have enough money to merit a formal plan, 18 percent say it’s too
complicated, and 13 percent say they don’t have enough time to develop
one.

“We want to change the perception that financial planning is
inaccessible, too expensive and too complicated,” said Kallsen. “Most
people have short-term and long-term goals, either in their heads or
documented informally. We can help capture those ideas and create a plan
to achieve them. It’s that simple.”

If I had a Million Dollars (Would I be Rich?)

According to the survey, Americans believe it takes an average $2.3
million in personal net worth to be considered “wealthy.” That’s more
than 20 times the actual median net worth of U.S. households, according
to the Federal Reserve’s Survey of Consumer Finances released in 2017.

More than half of Americans are optimistic that they will be wealthy at
some point in their lives, and two in five believe they will achieve
that goal within a decade. Eight percent say they already consider
themselves wealthy, although their numerical definition of wealth is
lower—they believe they achieved wealth at almost $700,000 in net worth.

Despite the high dollar amounts Americans use to define wealth, when it
comes to feeling personally wealthy, 72 percent say it isn’t about a
dollar amount at all, but rather the way they live their lives.

When asked what they would do with a sudden $1 million windfall, more
than half (54 percent) of survey respondents say they would spend it—on
a house first, followed by cars and travel. In addition, they say they
would use the funds to pay down debt (28 percent), invest (23 percent)
and save (21 percent). In comparison to other generations, Gen Z
respondents were the most likely to say they would save at least a
portion (37 percent).

Schwab has created a Modern Wealth Quiz to help people gain insights
about their own saving, spending, and investing habits. The brief,
multiple-choice questionnaire is available at www.schwab.com/MyModernWealth.

About the Modern Wealth Survey

The online survey was conducted by Logica Research from February 8 to
February 14, 2019, among a national sample of 1,000 Americans aged 21 to
75 and an augment sample of 200 older Gen Zers aged 18-22 for
generational comparisons. Quotas were set to balance the national sample
on key demographic variables. Supporting documentation for any claims or
statistical information is available upon request. The margin of error
for the national sample is three percentage points.

About Charles Schwab

At Charles Schwab, we believe in the power of investing to help
individuals create a better tomorrow. We have a history of challenging
the status quo in our industry, innovating in ways that benefit
investors and the advisors and employers who serve them, and championing
our clients’ goals with passion and integrity. More information is
available at www.aboutschwab.com.
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Disclosures

Through its operating subsidiaries, The Charles Schwab Corporation
(NYSE: SCHW) provides a full range of securities brokerage, banking,
money management and financial advisory services to individual investors
and independent investment advisors. Its broker-dealer subsidiary,
Charles Schwab & Co., Inc. (member SIPC,
www.sipc.org),
and affiliates offer a complete range of investment services and
products including an extensive selection of mutual funds; financial
planning and investment advice; retirement plan and equity compensation
plan services; compliance and trade monitoring solutions; referrals to
independent fee-based investment advisors; and custodial, operational
and trading support for independent, fee-based investment advisors
through Schwab Advisor Services. Its banking subsidiary, Charles Schwab
Bank (member FDIC and an Equal Housing Lender), provides banking and
lending services and products. Logica Research is not affiliated with
the Charles Schwab Corporation or its affiliates. More information is
available at www.schwab.com
and www.aboutschwab.com.

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Contacts

Hibah Shariff
Charles Schwab
415-667-0507
[email protected]