Economy Watch: Americans Feeling Better About Their Own Finances

The Financial Security Index hit the highest point in its four-year history.

Consumer sentiment and consumer confidence are useful metrics to follow, but they aren’t the only way of tracking how consumers feel about their financial condition and, by extension, the wider economy. Another notable metric is the Financial Security Index, the latest of which was produced by and based on a survey conducted by Princeton Survey Research Associates International from Jan. 8 to Jan. 11 with 1,000 adults living in the continental U.S. It gauges consumers’ comfort level with their savings and debt, net worth, and overall financial situation. Any reading above 100 indicates improved financial security compared to one year ago, while any reading below 100 indicates deterioration in financial security over the preceding year.

On Monday, Bankrate reported that the Financial Security Index hit the highest point in its four- year history, climbing to 103.1. The high isn’t the result of a surge in optimism among Americans, but rather fewer people noting deterioration. Or as Bankrate’s chief financial analyst Greg McBride put it, “Americans’ feelings of financial security hit a record high, not because things got better, as much as they got ‘less bad.’ ”

After five years of heightened misery and pessimism about the economy, even that’s another bit of good news in the recent parade of good news for real estate interests. Consumer state of mind affects retail properties more directly than any other sector, but in fact there’s no escaping the impact of consumer perception on the entire economy (and thus every property type). How consumers feel about their own financial condition, and the condition of the wider economy – whether strictly fact-based or not – profoundly affects their propensity to spend and borrow.

The survey included questions about job security, amounts of savings and debt, net worth, and overall financial conditions. In all of those categories, the majority of respondents said they felt about the same as a year ago, but a sizable minority said in each case that things were better, except for the amount of savings. Many fewer said things were worse. Interestingly – and hopefully, since this particular group took it hard during the recession — Millennials have the highest instance of all age groups of noting improved conditions compared to one year ago, according to Bankrate. If the trend continues, even more Millennials will escape their parents’ houses, rent apartments, and buy things to put in them (and maybe even thinking of the day when they’ll want to buy a residence).