Multicultural Study 601 E Street, NW Washington DC 20049 1-888-OUR-AARP (1-888-687-2277) www.aarp.org 2004 Perspectives Past, Present and Future: Traditional and © 2005 AARP May be copied only for noncommercial purposes and with attribution; permission required for all other purposes. Alternative Financial Practices of the 45+ Community D18329 Acknowledgements Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community was conducted by AARP Knowledge Management for AARP’s Brand Management Department with the assistance of AARP’s Consumer Protection Team, AARP’s Office of Diversity, and the Office of Public Policy. We would also like to give a special thanks to our AARP and external colleagues, who supported us in survey development, data feedback, and helped in understanding some of the findings: Michael Murray, AARP Brand Management Neal Walters, Public Policy Institute Mike Hilker, AARP Brand Management DaCosta Mason, State Affairs Richard Gellman, AARP Brand Management Jo Reed, Federal Affairs Muriel Cooper, AARP Communications Carmelita Tursi, AARP California Barbara Foelber, AARP Communications Susan Wang, AARP California Devra Cohen, Community Initiatives Eddie Rivas, AARP Alaska Lona Choi-Allum, AARP Knowledge Management Margaret Simms, Joint Center for Political and Gail Kutner, AARP Knowledge Management Economic Studies Sislena Grocer Ledbetter, AARP Knowledge Cheryl Hill Lee, The Washington Urban League Management Hilary Shelton, NAACP Jeff Love, AARP Knowledge Management Zelna Joseph, National Council of Negro Women Shereen Remez, AARP Knowledge Management Tony Rodriguez, National Consumer Law Center Lily Liu, AARP Knowledge Management Carlos Soto, AARP and Hispanic Corporate Council Marta Arbelaez, AARP Diversity Aryani Ong, Organization of Chinese Americans Aiyshen Padilla, AARP Diversity Vivien Kao, Chinese Culture and Community Service Ron LeGrand, AARP Diversity Center, Inc. Darlene Perry, AARP Diversity Annie Tsai, Chinese Culture and Community Service Nileeni Meegama, AARP Member Value Center, Inc. Jeanne Anthony, AARP Member Value Alan Allery, National Resource Center for Native Jerry Florence, AARP AED Membership/Director, American Aging AARP Foundation Judy Wang, Georgetown University Medical Center Jennie Chin Hansen, On Lok, Inc and AARP Board of Directors This report was prepared by Sislena Grocer Ledbetter and Lona Choi-Allum, both of AARP Knowledge Management. AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have Bridget Small, Consumer Protection For additional information, contact Sislena Grocer Sally Hurme, Consumer Protection independence, choice and control in ways that are beneficial and affordable to them and Ledbetter at 202-434-6294. Jennifer Leach, Consumer Protection society as a whole. We produce AARP The Magazine, published bimonthly; AARP Bulletin, Andrés Castillo, Consumer Protection ©2005 AARP Reprinting with Permission our monthly newspaper; AARP Segunda Juventud, our bimonthly magazine in Spanish Bonita Brady, AARP State and National Initiatives AARP Knowledge Management and English; NRTA Live & Learn, our quarterly newsletter for 50+ educators; and our 601 E Street NW website, www.aarp.org. AARP Foundation is an affiliated charity that provides security, George Gaberlavage, Public Policy Institute Washington DC 20049 Sharon Hermanson, Public Policy Institute protection, and empowerment to older persons in need with support from thousands of www.aarp.org/research volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community Findings from a Multicultural Survey of Americans 45 and older Contents 3 Executive Summary 19 Spending Behavior 3 Introduction 21 Savings Behavior 5 Summary of Findings 22 Checking Behavior 5 Major Concerns 22 Reasons for Saving 7 Spending Behavior 25 Borrowing 7 Saving Behavior 26 Shopping for Loans 7 Banking on Quality, Convenience, and Safety 27 Banking on Quality, Convenience, and Safety 8 Credit and Debt 27 Credit Card Usage 9 Who is Saving 31 Other Financial Pursuits 9 Borrowing Behavior 32 Protecting One’s Most Prized Possession: Identity 11 Protecting One’s Identity 32 Protecting Financial Privacy 11 Conclusions 37 Summary and Trends 13 Detailed Findings 38 Findings by Race/Ethnicity 13 Concerns: Perception and Reality 38 African Americans 13 Financial Perceptions 38 Hispanics 14 Major Concerns about Everyday Expenses 38 Asians 17 Debt Management 39 American Indians 19 Money Management 101 Appendix A: Methodological Report Visit www.aarp.org/research/financial/retirementsaving/2004_perspectives.html Appendix B: Annotated Questionnaire Visit www.aarp.org/research/financial/retirementsaving/2004_perspectives.html Appendix C: Executive Summary Visit www.aarp.org/research/financial/retirementsaving/2004_perspectives.html Figures Executive Summary 6 Figure A: Major Concerns By Race/Ethnicity 2 9 Figure B: People Currently Saving Money By Race/Ethnicity 10 Figure C: Protective Factors In Which People Participate By Race/Ethnicity Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Detailed Findings 13 Figure 1: Past Financial Perceptions By Race/Ethnicity 14 Figure 2: Future Financial Perceptions By Race/Ethnicity 15 Figure 3: Major Concerns By Race/Ethnicity 16 Figure 4: Financial Pursuits for the Next Two Years by Gender 18 Figure 5: Debt Levels By Race/Ethnicity 20 Figure 6: Financial Pursuits for the Next Two Years by Race/Ethnicity 21 Figure 7: People Currently Saving Money By Race/Ethnicity 23 Figure 8: People Who Have Checking Accounts By Race/Ethnicity 24 Figure 9: Reasons For Saving By Race/Ethnicity 25 Figure 10: Reasons For Saving By Age 26 Figure 11: Borrowing Behavior By Race/Ethnicity 27 Figure 12: Those Who Shopped For The Best Loan Interest Rate By Race/Ethnicity 28 Figure 13: Important Factors When Choosing A Place To Save 29 Figure 14: Important Factors When Choosing A Place To Cash A Check 30 Figure 15: Credit Card Usage By Race/Ethnicity 30 Figure 16: Credit Card Usage By Income 33 Figure 17: Credit Card Usage By Education 33 Figure 18: Financial Activities Over The Past Two Years By Race/Ethnicity 34 Figure 19: Financial Activities Over The Past Two Years By Age 35 Figure 20: Protective Factors In Which People Participate By Race/Ethnicity 36 Figure 21: Protective Factors In Which People Participate By Income Executive Summary a 401(k) instead of a defined benefit. The 2004 Multicultural Survey was Introduction designed to address a broad range of American consumers are working longer financial behaviors within the 45+ com- and living longer while spending more and munity. It explores spending, saving, and 3 struggling to save more. Without proper borrowing patterns of the 45+ consumer, Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey balance, this recipe may lead to disaster for with an emphasis on past and future mature Americans. Among the multicultural financial activities including purchasing community of African Americans, Hispanics, homes, saving for retirement, and paying Asians, and American Indians, this is medical bills. especially true because the ebb and flow of This survey is unique because it includes financial currency often disproportionately oversamples of African Americans, affects them in a negative way. Hispanics, Asians, and for the first time, Today, creating, sustaining, and protecting American Indians.1 Various multicultural one’s financial security is challenging but organizations including African American, critical. With the steady demand for con- Hispanic, Asian, and American Indian sumers’ dollars, and a prevalent “spend now, organizations were consulted during the pay later” mentality that encourages credit development of this survey to make sure card use, obtaining lifetime financial security that the questions and perspectives were is a deliberate and often painstaking process. relevant and culturally sensitive. Maintaining financial stability in Because we were interested in financial retirement has always been important. behaviors in multicultural communities that Now, more than ever, it requires diligence may have been omitted from prior surveys, from Americans age 45+. They have seen we also asked about nontraditional financial threats to historically sound financial activities. For example, we found that people systems. Social Security, which was never without bank accounts (the “unbanked”) intended to be the sole source of retirement compared with those with bank accounts income, will remain a stable income source more often use alternative/nontraditional for future generations despite long-term means for banking such as check cashing financial challenges. Most of tomorrow’s outlets and payday lenders. workers are not likely to receive a defined Several survey findings are particularly benefit pension from their employers—and noteworthy. First, all consumers age 45+ are most who do receive a pension will receive worried about how they will cover basic 1 Thesurvey was conducted by telephone between September 2, 2004 and October 10, 2004, by NOP World. The survey was conducted among a nationally representative sample of 1,509 people, age 45 and older. Oversamples, when combined with those from the general sample, included at least 300 African American, 300 Hispanic, 300 Asian, and 200 American Indian interviews. Hispanics were surveyed in Spanish. However, all other races, including Asians (who may not have been native English speakers) were interviewed in English. For that reason, Asian responses may not consistently and/or accurately reflect non-English speaking Asians. Similarly, American Indians were interviewed from several contiguous states and Alaska. We did not call American Indian reservations. For that reason, findings may not accurately reflect American Indians who reside on reservations. financial living expenses. In general, home-centered spending. They give younger people (ages 45 to 64) seem to be priority attention to getting a mortgage, more concerned about covering these paying off a mortgage, and remodeling expenses than people age 65+. Mature their homes. Americans 45+ are somewhat or very 4 • African Americans, regardless of concerned about all 10 items presented income, are more likely than are Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey in the survey, including how they will consumers in general to say they will obtain money to pay their mortgage or care for grandchildren or aging parents rent, and how they will provide money in the next two years. to care for grandchildren. • In addition, a greater proportion of • We found that half (50%) of older Hispanics, regardless of income, plan to Americans 45+ are somewhat or very start businesses in the next two years concerned about meeting their monthly compared with the general population. costs such as electricity, utilities, heating and cooling, telephone, grocery bills, • Younger consumers (age 45 to 54) are and food. Almost two-thirds (64%) are more likely than consumers age 55 to somewhat or very concerned about health 64 and 65+ to be saving to pay off debt, care expenses including prescription drug to pay for school tuition, and to costs. However, in general, a significantly purchase a business. greater proportion of African Americans, The 2004 Retirement Confidence Survey Hispanics, Asians, and American Indians (consumers 18+) found 68% of all workers than the general public or non-Hispanic have already saved for retirement and 58% whites express heightened concern about are currently saving for retirement.2 The these expenses. 2004 Multicultural Study revealed that Secondly, we found that despite serious more than three quarters of respondents financial concerns among 45+ consumers, in the 45+ age group (76%) are currently a significant number of people say they will saving for retirement. spend money on leisure activities in the next Another important finding relates to two years. When presented with a list of activ- protecting one’s financial and personal ities they anticipate in the next two years, information. According to Beales (2002) of consumers 45+ were more likely to say they the Federal Trade Commission, older adults will be going on vacation (63%) than are considered to be more vulnerable, and building an emergency fund (41%). Other therefore more at risk for opportunities of findings include: fraud. Low rates of identity theft among older adults could be attributed to the fact • African Americans, Hispanics, Asians, that they are not as likely to report when and American Indians plan to focus on they have been victimized.3 2 EmployeeBenefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2004 Retirement Confidence Survey. 3 Beales, H. (2002). Prepared statement of the Federal Trade Commission on Identity Theft: The Impact on Seniors Before the Senate Special Committee on Aging. www.ftc.gov/os/2002/07/020718identitytheft.htm We asked consumers about seven steps Summary of Findings that may protect financial and personal information. The steps are: regularly refusing Major Concerns to give out personal information; regularly Respondents were asked how concerned reviewing financial documents; shredding they are about having enough money to 5 unwanted financial information; carrying pay for several basic expenses. Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey fewer credit and identification cards; • An astounding 50 percent of all midlife ordering and reviewing a copy of one’s and older Americans go to sleep every credit report; signing up for the national night concerned about having enough do-not-call list; and telling credit bureaus money to pay for basic monthly costs such they do not want to receive unsolicited as telephone, groceries, and utilities. While financial offers by mail. the proportion of Asians (50%) who express • An overwhelming majority (96%) of the deep concern about monthly costs mirrors general public age 45+ reported having the 45+ general public, far more people in taken at least one of the steps to the African American (68%), Hispanic safeguard their personal and financial (60%), and American Indian (60%) commu- information. nities are concerned about costs including utility, telephone, and grocery bills. These and other findings are highlighted in the summary of findings. • In general, paying for health care expenses tops the list of concerns, with almost two-thirds (64%) of the 45+ public having strong concerns about affording health care expenses, including the cost of prescription drugs. • Furthermore, having cash for emergency expenses (58%) and long-term care, such as having someone care for them as they grow older, resonates with the majority (51%) of 45+ respondents. Overall, African Americans, women, those with a high school diploma or less, and non-homeowners are most concerned about having money to cover expenses. More specifically: • Women are highly concerned about paying for monthly utility bills, major repairs, consumer or credit card debt, someone to care for them as they age, funeral and burial expenses, and health • Low-income consumers are worried care costs including prescription drugs. about paying homeowners insurance and paying off their consumer debt. • Renters worry about having enough In addition, those with less than a money to pay their rent, paying their college education are worried about 6 consumer debt or credit cards, and burial expenses and prescription generating enough money for unforeseen Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey drug costs. incidents and emergencies. FIGURE A: MAJOR CONCERNS BY RACE/ETHNICITY Q: Please tell me how concerned you are about having enough money to pay for...? Are you concerned, somewhat concerned, not too concerned, or not at all concerned? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Health care expenses including prescription drug costs Total General Public 64% African American 73% Asian 67% Non-Hispanic White 63% Hispanic 62% American Indian 56% An emergency expense Total General Public 58% African American 68% Hispanic 64% American Indian 62% Asian 61% Non-Hispanic White 55% Someone to take care of you as you age Total General Public 51% African American 61% Hispanic 53% Asian 52% Non-Hispanic White 50% American Indian 45% Your monthly costs such as electricity, utilities, heating and cooling, telephone, grocery bills, and food Total General Public 50% African American 68% Hispanic 61% American Indian 61% Asian 50% Non-Hispanic White 48% Major repairs such as replacing the roof or car repairs Total General Public 45% African American 60% American Indian 56% Asian 52% Hispanic 50% Non-Hispanic White 43% Spending Behavior Saving Behavior Respondents were provided with a list of • Almost six in 10 (59%) Hispanics say they 14 financial activities or major purchases, are not saving any money, as do more and asked which ones they would engage than four in 10 American Indians (44%), in over the next two years. Despite the and almost four in 10 African Americans 7 serious financial concerns expressed by (39%). Fewer than one-third of Asians Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey respondents age 45+, 63% are going on (31%) report not saving any money. vacation, 61% will pay medical bills, and • More men than women report saving. 57% will save for retirement. People with higher incomes are more • African Americans are more likely than likely to report saving than those with the general population to participate in lower incomes. Those with some college 10 of the 14 activities over the next two education or greater are more likely to years. They are more likely to pay off have savings than those with a high credit card debt or loans (52%), build school diploma or less. an emergency fund (51%), take care of grandchildren or aging family members Banking on Quality, (46%), and pay for a wedding (13%). Convenience, and Safety • African American, Hispanic, Asian, and People choose savings and checking American Indian consumers will focus venues for similar reasons. However, more on spending money on home-centered people assign a higher level of importance activities in the next two years. All these to choosing where to cash a check than to groups give priority attention to getting choosing where to save. Far more survey a mortgage, paying off a mortgage, and respondents hold checking than savings remodeling their home. accounts, which may account for the difference in assigned importance. • African Americans, regardless of income, are more likely than any other subgroup, • More than four in 10 (42%) Hispanics, including the general population to say one-quarter of African Americans (27%), that they will care for their grandchildren and one-fifth of American Indians (22%) or aging parents in the next two years do not have checking accounts. Fewer (46% vs. 37% in the general population). than one in 10 Asians (8%) and non- Hispanic whites (6%) say they have no checking account. • Top reasons for choosing a savings account location include safety (62%), convenience (61%), and quality of service (58%). The ranking of factors for checking accounts is similar, but percentages are much higher. Almost nine in 10 rated quality of service (91%), convenience • Within the last two years, almost one in (87%), and safety (85%) as important three in the 45+ general public had made when choosing a place to cash a check. the major financial commitment of getting a car loan (30%); one in five (23%) • When choosing a place to save, Americans had gotten a home mortgage; fewer than 8 age 65+, compared with those ages 45 to one in 10 (7%) had gotten a student loan. 54, are more likely to choose based on Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey reputation, banking options, and costs. Credit and Debt • Consumers with incomes less than Although credit card use is widespread, $20,000 and consumers with a high everyone does not use a credit card. In the school diploma or less are more likely next section on credit cards and debts, we than those with incomes above $60,000 first discuss those people age 45+ who say or a college degree to choose a savings they do not use credit cards (credit cards location based on convenience. not connected with their bank accounts, like American Express, Visa, Mastercard, The number of minority consumers who Discover, or department store card). engage in alternative financial practices is of growing concern. Research has shown • More than one-quarter of the general that alternative financial institutions tend to population report they do not use credit congregate around minority and low-income cards (28%). Far more African Americans communities,4 which increases the likelihood (56%), American Indians (53%), and that those populations may engage in risky Hispanics (64%) say that they do not use financial behavior. To gauge our respondents’ a credit card. Asians are the least likely to experiences, we asked which major report that they do not use credit cards purchases and risky financial behaviors they (20%). had engaged in within the last two years. • Almost eight in 10 (78%) of Asians use • Overall, few people had engaged in credit cards, more than among the alterative financial behaviors. Less than general public (67%) and non-Hispanic 10 percent had used a check cashing Whites (72%). outlet (7%), 4 percent rented to own or • Regardless of age, those with higher pawned a personal item for cash, and incomes or more education are more likely 2 percent had obtained a payday loan. to report using credit cards than those with The level of involvement in these trans- lower incomes or those with less education. actions varied by group. Participation rates within minority communities were up to four times higher than among the 45+ general public. 4 U.S. Department of Housing and Urban Development. Unequal Burden in Atlanta: Income and Racial Disparities in Subprime Lending. April 2000. FIGURE B: PEOPLE CURRENTLY SAVING MONEY BY RACE/ETHNICITY Q: Are you currently saving money? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 1% Total General Public 68% 28% 3% 1% 9 Non-Hispanic White 71% 26% 3% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Asian 65% 31% 1% 2% African American 57% 39% 4% American Indian 54% 44% 3% 1% Hispanic 36% 59% 4% Yes No Donít Know (VOL.) Refused (VOL.) Who Is Saving Borrowing Behavior To capture current financial behavior, we When respondents were asked if they have asked respondents to answer “yes” or “no” borrowed money from any of a predeter- when asked if they are saving for any of a mined list of financial sources in the past two predetermined list of reasons. years, banks—not surprisingly—emerged as a top choice. More than one-fifth (23%) • Overall, more than two-thirds of 45+ of the 45+ general public says they have Americans report saving money (68%). borrowed from traditional institutions like Of those currently saving, most report banks in the past two years. Seventeen saving for retirement (76%)—the leading percent borrowed money against their home, reason across all subgroups. Almost seven and 16 percent borrowed from credit cards. in 10 say they are saving money to build an emergency fund (69%). Approximately • Results among ethnic groups were half (51%) are currently saving for a inconsistent. Family members are vacation, wedding, or special event. lenders of choice for one-fifth of African Americans (20%), followed by banks • In general, compared with non-Hispanic (13%). African Americans are also more whites, more African Americans, Hispanics, than twice as likely as the general Asians, and American Indians report saving population to go to churches or religious for the seven activities, including saving to institutions (7% vs. 3%) or payday purchase a home or to start a business. advance lenders (4% vs. 1%) for loans. • Age is also an important indicator of who • More than one-quarter of American is saving. Those ages 45 to 54 are far Indians queried chose to borrow money more likely than those ages 55 to 64 to be from banks (27%) in the past two years. savings for a home (36% vs. 11%) or to American Indians were also more likely pay off school tuition (13% vs. 8%). than the general population to borrow from family members (22% vs. 9%), friends (12% vs. 5%), and payday lenders (4% vs. 1%). FIGURE C: PROTECTIVE FACTORS IN WHICH PEOPLE PARTICIPATE BY RACE/ETHNICITY Q: Please tell me if you have taken any of the following actions in the past two years? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Regularly refused to give out personal information like your Social Security 10 Reactive Behaviors number over the phone unless you have initiated the call Total General Public 86% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Non-Hispanic White 87% American Indian 81% African American 79% Asian 73% Hispanic 63% Regularly reviewed your credit card or other financial statements Total General Public 77% Non-Hispanic White 79% Asian 75% African American 62% American Indian 62% Hispanic 52% Regularly shredded or destroyed credit card receipts, credit applications, bank checks, or financial statements Total General Public 75% Non-Hispanic White 77% American Indian 70% African American 69% Asian 69% Hispanic 45% Proactive Behaviors Regularly carry fewer credit or identification cards Total General Public 60% Asian 71% Non-Hispanic White 62% African American 56% American Indian 55% Hispanic 42% Signed up for national or state telemarketing do-not-call list Total General Public 54% Non-Hispanic White 58% Asian 48% American Indian 36% African American 33% Hispanic 26% Ordered and reviewed a copy of your credit report Total General Public 31% African American 38% Non-Hispanic White 30% Hispanic 30% American Indian 30% Asian 29% Told the three major credit bureaus that you do not want to receive unsolicited financial offers in the mail Total General Public 27% American Indian 35% Asian 30% Non-Hispanic White 28% African American 27% Hispanic 25% • Thirteen percent of Hispanics have three major credit bureaus that they do borrowed money against their homes in not want to receive unsolicited offers in the past two years; 12 percent borrowed the mail (27%). from family members and 12 percent from banks. Conclusions 11 When asked if they shopped around for Many organizations examine financial Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey the best interest rate before borrowing behaviors of the 45+ community, often money, a preponderance of Asians (71%) within the context of exploring the said yes. Non-Hispanic whites (66%), financial practices of all adults. Little Hispanics (60%), African Americans (52%), research has focused solely on the financial and American Indians (47%) also shopped practices of the maturing population. for rates before purchasing a loan. Commercial entities have shown interest in studying the spending and saving patterns Protecting One’s Identity among the 45+ population, because the boomers represent the biggest spenders Ninety-six percent of consumers take at in our economy. That research often fuels least one step to protect their financial marketing to the financial needs—or identity. We categorized behaviors into perceived needs—of the 45+ population. two categories. However, AARP’s study catalogs the • Reactive behaviors are behaviors that financial behaviors of 45+ Americans with respond to an outward trigger—such as emphasis on the financial practices of shredding documents after receiving mail African Americans, Hispanics, Asians, and or credit statements. Behaviors in the American Indians. The continuously reactive category include refusing to changing face of America dictates that disclose personal information, such as scholars, educators, and policy makers Social Security numbers, over the phone continue to explore, understand, and serve unless the individual made the call (86%), the financial needs and concerns of older reviewing credit statements (77%), and multi-ethnic communities. regularly shredding documents like credit The 2004 Multicultural Survey is a step card receipts, credit applications, bank in that direction. It catalogs the financial checks, or financial statements (75%). needs, concerns, and past, current, and future behaviors of America’s multicultural • Proactive behaviors are those that communities. It also addresses other require consumers to initiate some action underserved demographic segments such on their own without an outward trigger. as people age 65+, and those with lower People are far less likely to say that they incomes and education. Many of our participate in these steps, which include findings are not simply a function of race, carrying fewer credit cards (60%), signing but also of gender, education, and/or up for the national Do Not Call registry income. We note these findings within the (54%), ordering and reviewing a copy of full report as they emerge. their credit report (31%), and alerting the We found that financial trends often dial on many of these indicators in a followed the same direction among the positive direction. Conversations with general population as among the ethnic external partners suggest that some of the groups. However, ethnic groups often less-positive financial behaviors are a disproportionately report that they reflection of access to capital, banking 12 experienced or participated in many of the rules and regulations, and basic financial Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey negative financial practices like getting a knowledge within ethnic communities. payday loan, pawning an item for cash or That presents opportunities for more work credit, or renting to own. Further, we and consumer education about issues of found that ethnic groups fared worse than financial well-being. AARP, private and non-Hispanic whites on indicators like public institutions, and government “concerns about everyday financial needs” entities have the shared responsibility and “likelihood of saving money or having of holding themselves and the financial a checking account.” industry accountable. We must underscore We did find encouraging indicators in that all Americans must have access to fair ethnic communities. Asians are more likely financial goods and services so they too to become homeowners and Hispanics to can know that they have The Power to become business owners than members of Make It Better.™ the general public over the next two years. Furthermore, Hispanics are more likely than the 45+ general public to say they are debt free. African Americans and Hispanics are both saving aggressively to build emergency funds. African Americans are also more likely than all groups and the general public to say that they have ordered and reviewed a copy of their credit report in the past two years. More American Indians than other subgroups, including the general public, say that they have proactively told the three major credit bureaus they do not want to receive unsolicited financial offers in the mail. They are also less concerned than the other groups about being taken care of as they age and affording health care expenses including prescription drugs. As AARP continues its education and advocacy efforts in consumer protection, we must work continuously to move the Detailed Findings • Just under half (46%) of the general public said they are relatively the same Concerns: Perception financially today as they were two and Reality years ago. • However, when we examined subgroups, 13 Financial Perceptions we found that between one-fifth and Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey With consumer spending on the rise, one-third of African Americans, Hispanics, the impending challenges to national Asians, American Indians, and non- programs such as Social Security, and Hispanic whites report that they are burgeoning consumer debt, 45+ Americans worse off now financially than they are becoming increasingly concerned were two years ago. See Figure 1, p.13. about their financial well-being. A “spend now, pay later” attitude ill-equips mature We also asked, “Looking ahead two adults to fund the additional third of life years, what do you think your financial they can expect. This report explores situation will be?” See Figure 2, p.14. several financial behaviors that are • Among the general public, four in 10 important as older Americans consider expect no change in their financial finances in their later years. It catalogs situation in the next two years. A third desirable behaviors—having savings and is expecting an improvement in their checking accounts—and risky behaviors— finances in the next two years. frequenting payday lenders, check cashing outlets, and pawnshops. • More than one-quarter of Hispanics We asked two questions to gain a (27%) and American Indians (30%) are preliminary understanding of this group’s pessimistic about their financial future, perception of their own financial well-being. and far more likely than the general “Compared with two years ago, would public (21%) to predict that their you say that financially you are better financial situation will worsen in the off, worse off, or about the same?” next two years. FIGURE 1: PAST FINANCIAL PERCEPTIONS BY RACE/ETHNICITY Q: Compared with two years ago, would you say that financially you are better off, worse off, or about the same? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Total General Public 27% 27% 46% – Non-Hispanic White 28% 26% 46% – Hispanic 24% 36% 38% 2% Asian 21% 23% 54% 2% African American 17% 31% 52% – American Indian 16% 32% 51% 2% Better off Worse off About the same Don’t Know (VOL.) These findings may not all be just a circumstances than are their non-Hispanic matter of perception. white counterparts. In fact, we found many more African Americans, Hispanics, Asians • Data from an analysis of 2002 U.S. census and American Indians to be far more data reveals that the net worth of African worried than non-Hispanic whites and the 14 American and Hispanic households fell general population. Moreover, the groups 27% in the past census, while their Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey were highly concerned in almost every area white counterparts enjoyed a 2% gain mentioned on the survey. We probed ten in household wealth. Asians were not specific areas in order to better ascertain included in analysis of the study, but an the level of concern, whether very economist from the Pew Hispanic Center concerned or somewhat concerned, noted that their wealth levels tend to be among people 45+. See Figure 3, p.15. above African Americans and Hispanics An astounding 50% of all midlife and but below those of non-Hispanic whites.5 older Americans go to sleep every night Major Concerns about Everyday Expenses with concerns about covering basic living We know that oftentimes as people age and expenses like utilities, telephone, and food. stop working, their mobility decreases, level Far more in the multicultural community of health declines, and living expenses are worried. When we asked about level increase relative to their younger, fully of concern, we found that more than half employed days. Without adequate resources, of the general public is somewhat or very planning, and preparation, the combination concerned about several potentially of these factors often leads to increased major expenses. concerns about living expenses. These are • Paying for health care expenses tops not concerns about frills, but about how to the list with almost two-thirds (64%) of afford basic living expenses like food and the 45+ general public having strong utilities. Findings from this survey revealed concerns about affording medical that multicultural groups are often much expenses, including prescription drugs. more concerned about their financial FIGURE 2: FUTURE FINANCIAL PERCEPTIONS BY RACE/ETHNICITY Q: Looking ahead two years, what do you think your financial situation will be? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Total General Public 32% 21% 40% 7% African American 34% 23% 34% 10% Hispanic 34% 27% 29% 10% Non-Hispanic White 31% 20% 42% 7% American Indian 29% 30% 32% 9% Asian 25% 20% 45% 9% Better off Worse off About the same Don’t Know (VOL.) 5 Witte, G. and Henderson, N. Wealth Gap Widens for Blacks, Hispanics. The Washington Post. October 18, 2004. A11. Similarly, having cash for emergency As discouraging as the general public expenses worries almost six in 10 (58%) statistics are, the reality for some of the mature Americans. Moreover, long-term multicultural subgroups is even grimmer. care resonates as a major concern in Consider that one of the most fundamental mature America with half of 45+ people concerns—paying for basic monthly 15 (51%) worried about being cared for as household bills—plagues considerably more Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey they get older. African Americans, Hispanics, and American Indians than non-Hispanic whites. FIGURE 3: MAJOR CONCERNS BY RACE/ETHNICITY Q: Please tell me how concerned you are about having enough money to pay for...? Are you concerned, somewhat concerned, not too concerned, or not at all concerned? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Health care expenses including prescription drug costs Total General Public 64% African American 73% Asian 67% Non-Hispanic White 63% Hispanic 62% American Indian 56% An emergency expense Total General Public 58% African American 68% Hispanic 64% American Indian 62% Asian 61% Non-Hispanic White 55% Someone to take care of you as you age Total General Public 51% African American 61% Hispanic 53% Asian 52% Non-Hispanic White 50% American Indian 45% Your monthly costs such as electricity, utilities, heating and cooling, telephone, grocery bills, and food Total General Public 50% African American 68% Hispanic 61% American Indian 61% Asian 50% Non-Hispanic White 48% Major repairs such as replacing the roof or car repairs Total General Public 45% African American 60% American Indian 56% Asian 52% Hispanic 50% Non-Hispanic White 43% • While the proportion of Asian Americans • Hispanics show heightened concern (50%) who express deep concern about for seven of the 10 expenses, with the monthly utility bills (including heating greatest concern being having enough and cooling, telephone, and food) mirrors money for emergency expenses; 64% the 45+ general public, many more vs. 58% in the general public. 16 African Americans (68%), Hispanics • American Indians were more concerned Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey (61%), and American Indians (61%) are than the general public with about six of worried about covering these expenses. the 10 items presented, with the • At least four in 10 African Americans are greatest concern being having enough concerned about all 10 expenses, with money for basic monthly expenses the greatest concern about having including food and utilities, 61% vs. 50% enough money for health care expenses in the general public. See Figure 3, p.15. such as prescription drugs, 73%. African Women are living longer than men. Americans also express heightened Consequently, as women age, they are concerns about having enough money more likely to be widowed and spend their for emergency expenses and to insure older years without a spouse, at a time their homes against loss in case of fire or when financial security and peace of mind other disaster, having sufficient resources are especially important and hard to gain. to pay for long-term care expenses, Current findings reveal that a greater and having enough money to care for proportion of women than men are their grandchildren. FIGURE 4: FINANCIAL PURSUITS FOR THE NEXT TWO YEARS BY GENDER Q: Please tell me how concerned you are about having enough money to pay for…? Are you very concerned, somewhat concerned, not too concerned, or not at all concerned? Base: n=849, Male n=399, Female n=400 Health care expenses including prescription drug costs 61% 67% An emergency expense 52% 62% Your monthly costs such as electricity, utilities, heating and cooling, telephone, grocery bills, and food 48% 52% Someone to take care of you as you age 47% 54% Insurance on your home or apartment to protect 40% 43% against loss in case of fire or other disaster Major repairs such as replacing the roof or car repairs 39% 51% Having enough money to care for your grandchildren 32% 33% Your consumer or credit card debt 28% 26% Your monthly costs such as mortgage or rent 27% 30% Funeral and burial services 25% 32% Male Female worried about half of the 10 recurring Homeowners insurance and consumer expenses probed. As seen in Figure 4, p. 16, debt occupy the minds of a significant far more women than men are somewhat number of low-income consumers. Those or very concerned about: with lower educations are also worried about burial expenses and prescription • health care and prescription drugs costs 17 drug costs. (67% vs. 61%), Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Debt Management • emergency expenses (62% vs. 52%), Excessive personal or consumer debt can • elder care for themselves (54 vs. 47%), threaten financial security at anytime in one’s life. However, debt accumulation is • major repairs (51% vs. 39%), particularly relevant in midlife years and • funeral and burial expenses (32% vs. 25%). beyond. Approximately one-quarter (27%) of the general public says they are very or Overall, within the 45+ general public, extremely concerned with consumer debt. other groups likely to express great concern Moreover, a greater proportion of African about basic living expenses are: Americans (45%), Hispanics (43%), Asians • Women, (31%), and American Indians (30%) say they are concerned about consumer debt. • Non-homeowners, Similarly, while just fewer than four in 10 • African Americans, of the general public (38%) are at their limit with debt, saying they have as much • Consumers with lower incomes. debt or more debt than they can handle, Specifically, women are highly more African Americans, Hispanics, Asians, concerned about all of the concerns that and Americans Indians report this status. we probed, except for paying their In the following section, we delve mortgage or rent. However, women have further into how people are managing some additional concerns. They worry their personal consumer debt. We asked about funeral and burial expenses, long- respondents “Think for a moment term care expenses, and health care costs about your personal debt on which including prescription drugs—concerns you currently make interest payments. often associated with living longer. I am talking about debts you partially Renters worry about having enough pay off each month for things like money to pay their rent, paying their mortgages, credit cards, personal consumer debt or credit cards, and loans, or car loans.” See Figure 5, p. 18. generating enough to have money for unforeseen incidents and emergencies. FIGURE 5: DEBT LEVELS BY RACE/ETHNICITY Q: Think for a moment about your personal debt on which you currently make interest payments. I am talking about debts you partially pay off each month for things like mortgages, credit cards, personal loans, or car loans? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, 18 Asian n=300, American Indian n=200 You could handle more debt than you currently have Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Total General Public 34% Non-Hispanic White 37% Asian 29% American Indian 22% African American 21% Hispanic 17% About as much as you can handle financially Total General Public 32% American Indian 44% African American 39% Hispanic 34% Non-Hispanic White 32% Asian 32% Don’t have any personal debt (VOL.) Total General Public 21% Hispanic 35% Non-Hispanic White 21% Asian 19% American Indian 16% African American 14% More than you can handle financially Total General Public 6% African American 17% American Indian 10% Asian 8% Hispanic 7% Non-Hispanic White 5% Refused (VOL.) Total General Public 6% African American 8% Asian 8% Non-Hispanic White 5% American Indian 4% Hispanic 3% Don’t know (VOL.) Total General Public 2% Hispanic 4% Asian 4% African American 3% American Indian 3% African American 2% We wondered whether their current • Not surprisingly, lower income people debt is more than they can handle struggle more with debt than people financially; about as much as they can with higher incomes. handle financially; whether they could handle more debt than they currently Money Management 101 19 have; or whether they do not have any Spending Behavior Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey personal debt. American consumers are generous spenders. Midlife Americans or boomers represent • Thirty-eight percent of the 45+ general the largest population segment and the public is in considerable debt. Nearly biggest spenders, accounting for more than one-third (32%) has as much as they half of all U.S. spending. The typical American can handle; 6% has more than they consumer amasses a considerable amount of can handle. consumer debt by midlife, but continued Similar proportions of Hispanics (41%) spending without saving can sabotage a and Asians (40%) report that they are in secure, well-financed retirement. considerable debt. The majority of African We explored spending behaviors by Americans (56%) appear to be in debt (39% asking, “Which of the following financial with as much as they can handle, and 17% activities will you make in the next two with more than they can handle). Likewise, years?” See Figure 6, p. 20. the majority of American Indians say they Consumers were presented with a are in debt (54%). Non-Hispanic whites, list of 14 major financial activities or debt levels mirror those of the general purchases that they could engage in public (37%) who report being in debt. within the next two years. Participation On a positive note, 35% of Hispanics say rates vary by subgroup. that they do not have any personal debt, We found that overall, despite serious and an additional 17% say that they can financial concerns among the 45+ group, handle more debt than they currently a significant number of people say that in have—a finding unmatched across other the next two years they will be spending subgroups. This is consistent with the money on vacation and leisure. In fact, finding that almost two-thirds of Hispanics people are more likely to report going on say that they do not have credit cards vacation (63%) than saving for retirement (64%)—more than any other group. (57%) or building an emergency fund Other findings include: (41%). Other findings include: • Men are almost twice as likely as women • African Americans will participate in nine to report that they have more debt than out of 14 activities over the next two years. they can handle (7% vs. 4%). African Americans (46%), regardless of income, are more likely than are those in • Men also are prepared to handle more the general population (37%) to say that debt than women are (42% vs. 26%). they will be caregivers for grandchildren or aging parents in the next two years. FIGURE 6: FINANCIAL PURSUITS FOR THE NEXT TWO YEARS BY RACE/ETHNICITY? Q: Which of the following financial activities will you make in the next two years? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Take care of grandchildren or aging family members 20 Total General Public 37% African American 46% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey American Indian 41% Hispanic 37% Asian 36% Non-Hispanic White 35% Purchase a car Total General Public 30% Asian 33% Non-Hispanic White 31% Hispanic 29% American Indian 28% African American 27% Remodel your home Total General Public 22% Hispanic 32% Asian 30% American Indian 29% African American 29% Non-Hispanic White 20% Pay college tuition for your child or grandchild Total General Public 20% Hispanic 34% Asian 27% African American 25% American Indian 20% Non-Hispanic White 19% Pay off your mortgage Total General Public 16% Hispanic 29% American Indian 25% Asian 24% African American 23% Non-Hispanic White 14% • Hispanics (24%) are four times as likely as • Almost six in 10 Hispanics (59%) report the 45+ general public (6%) to say that they not saving any money at all. In a follow- will start a business in the next two years. up question to savers, we asked if they had a place to save. One in 10 (10%) • African Americans, Hispanics, Asian Hispanics say they do not have a place Americans, and American Indians will 21 to save their money, which is far greater focus on home-centered spending. Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey than the other subgroups. They give priority attention to getting a mortgage, paying off a mortgage, and • More than four in 10 American Indians remodeling their homes. (44%) and three in 10 African Americans (39%) report not saving any money. • Those age 45 to 54 are more likely than However, when we asked about saving for the older cohorts of 55 to 64 and 65+ to retirement in the next two years, more be saving to pay off debt, to pay for school than half of all subgroups mentioned that tuition, and to purchase a business. they would. It seems that those who are saving are putting a high priority on Savings Behavior retirement savings. See Figure 7. We asked, “Are you currently saving money?” More than two-thirds (68%) of the general • In general, more men (71%) report public reported that they are currently saving than do women (65%). People saving money. However, African Americans, with incomes above $30,000 and those Hispanics, and American Indians are saving with some college or more, are more far less than the general public. See Figure 7. likely to report saving money than those Our findings also reveal that African with incomes below $30,000 or those Americans, Hispanics, Asians, and American with a high school diploma or less. Indians save at much lower rates than their non-Hispanic white counterparts do. FIGURE 7: PEOPLE CURRENTLY SAVING MONEY BY RACE/ETHNICITY Q: Are you currently saving money? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 1% Total General Public 68% 28% 3% 1% Non-Hispanic White 71% 26% 3% 1% Asian 65% 31% 2% African American 57% 39% 4% American Indian 54% 44% 3% 1% Hispanic 36% 59% 4% Yes No Don’t Know (VOL.) Refused (VOL.) Checking Behavior Other factors related to an increased We next asked, “Do you have a checking likelihood of having a checking account are account in a bank, credit union, or savings and higher income, more education, and being loan?” More than four out of five said that married or partnered. they have a checking account in a bank, We asked respondents who said they do 22 credit union, or savings and loan (84%). not have a checking account whether they Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey See Figure 8 on p. 23. use money orders, cashiers checks, or bank Although a preponderance of 45+ checks. Overall, more than four in 10 (42%) consumers say they have checking accounts, answered in the affirmative. Notably, one- many do not. To meet the needs of consumers quarter (27%) of those without checking without checking accounts, alternative accounts refused to answer the question. financial institutions like check-cashing Of those who do not have checking outlets have become increasingly popular. accounts, far more American Indians (58%), Check-cashing stores often target consumers African Americans (55%), and Asians (49%) without bank accounts in poorer neighbor- than the general public conduct business hoods. These alternative financial institutions using money orders, cashiers checks, or offer fast cash, and seemingly minimal fees. bank checks. Hispanics are the sole ethnic However, these fees may actually reach as group using money orders, cashiers checks, high as 400% annual percentage rate (APR) or bank checks less frequently than the on a single loan. When you consider how general population (32% vs. 42% general these costs could accumulate week after public). It is noteworthy that from eight (8%) week and month after month, it is clear to more than twenty percent (27%) of each that a checking account, which can be low- group (including the general public) cost or no-cost for older consumers, makes consistently refused or gave no answer to the economic sense. question “Do you use money orders, cashier We found the following regarding checks, or bank checks?” checking behavior. Reasons for Saving • Similar to the general public age 45+, As Americans prepare to live an estimated 25 almost nine in 10 Asians (89%), and years after their traditional retirement, saving non-Hispanic whites (88%) have is paramount. Many indicators strongly checking accounts with a bank, credit suggest that American consumers have union, or savings and loan, as do seven habits of accumulating debt by overspending. in 10 American Indians (70%). Far fewer However, according to some, the generation African Americans (59%) and Hispanics age 45+ has realized a slight improvement in (51%) have checking accounts. Seven their saving patterns. The AXA-Financial Nest percent (7%) of all respondents and Egg study reports a shift in mindset. “In 2003, thirteen percent (13%) of African 43%—compared with only 26% in 1993—said Americans refused to reveal whether or that their single greatest economic concern not they have a checking account. was having adequate resources in retirement. FIGURE 8: PEOPLE WHO HAVE CHECKING ACCOUNTS BY RACE/ETHNICITY Q: Do you have a checking account in a bank, credit union, or savings and loan? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Total General Public 84% 8% – 7% 23 Asian 89% 8% – 3% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Non-Hispanic White 88% 6% – 6% American Indian 70% 22% – 7% African American 59% 27% – 13% Hispanic 51% 42% – 7% Yes Go to Q: 10 No Go to Q: 9b – Don’t Know Refused The proportion putting a higher priority on start a business, pay off debts, and build providing a financial base for their retirement an emergency fund. grew from 43% (1993) to 55% (2003).”6 • Age is also an important indicator of who According to the 2004 Retirement is saving. Those ages 45 to 54 are twice as Confidence Survey of consumers age 18+ likely as those age 65+ to be saving in released by the Employee Benefits several categories. This finding is consis- Research Institute, 68% of all workers tent with other findings in the survey, have saved for retirement and 58% are suggesting people age 45 to 54 are more currently saving for retirement.7 financially active than those age 65+, in all To explore further what 45+ Americans are categories surveyed. See Figure 10, p 25. currently saving for, we asked respondents, “Please answer ‘yes’ or ‘no’ if you are saving Compared with those age 65+, people for any of these reasons.” See Figure 9, p. 24. ages 45 to 54 are: Of consumers who save, most report saving • More than twice as likely to be saving to for retirement (76%), the number one reason pay off debts (44% vs.17%). across all subgroups. The next most popular is “to build an emergency fund” (69%). • More than three times as likely to be saving to pay school tuition (36% vs. 8%). • Compared with the general public, African Americans, Hispanics, Asians, • Four times as likely to be saving to start and American Indians are more likely to a business (8% vs. 2%). report saving for most of the options • More than six times more likely to be given, including saving to buy a home, saving to purchase a home (13% vs. 2%). 6 FromSpending To Savings: Ten Years Shows Shift In Mind-Set Of Nation’s Baby Boomers. The AXA Nest Egg Study polled 701 baby boomers born between 1946 and 1964, with annual household incomes of $75,000 and above. The AXA Nest Egg Study, conducted by the independent research firm Mathew Greenwald & Associates, was administered over a four- week period in August, 2003. The comparative data from the 1993 Equitable Nest Egg Study is based on a survey of 600 baby boomers in households earning $50,000 a year at that time, www.equitable.com/pressroom/01132004_nest_egg.html 7 Employee Benefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc., 2004 Retirement Confidence Survey. FIGURE 9: REASONS FOR SAVING BY RACE/ETHNICITY Q: Please answer ‘yes‘ or ‘no‘ if you are saving for any of these reasons (% yes). Base: Total General Public n=1042, Samples: Non-Hispanic White n=929, African American n=177, Hispanic n=122, Asian n=213, American Indian n=115 For retirement 24 Total General Public 76% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Asian 86% Hispanic 81% Non-Hispanic White 76% American Indian 76% African American 72% To build an emergency fund Total General Public 69% Hispanic 78% African American 75% American Indian 74% Asian 70% Non-Hispanic White 69% For vacation, wedding, or special event Total General Public 51% Asian 58% African American 53% Non-Hispanic White 52% Hispanic 49% American Indian 48% To pay off debts Total General Public 30% African American 52% Hispanic 51% American Indian 45% Asian 42% Non-Hispanic White 30% To pay school tuition Total General Public 19% Asian 40% Hispanic 33% African American 27% American Indian 23% Non-Hispanic White 18% To purchase a home Total General Public 8% Hispanic 30% African American 22% Asian 21% American Indian 20% Non-Hispanic White 8% To start a business Total General Public 5% Hispanic 23% Asian 15% American Indian 14% African American 11% Non-Hispanic White 4% Borrowing more than twice as likely as the general Consumers borrow from many sources: population to go to churches or religious traditional banks, friends, families, credit institutions (7% vs. 3%) or payday cards, and non-bank institutions. To learn advance lenders (4% vs. 1%) for loans. about borrowing behavior, we asked, “In the • More American Indians preferred 25 past two years, have you ever borrowed from borrowing money from banks/credit Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey the following places?” See Figure 11, p. 26. unions/savings and loans (27%) than Overall, traditional institutions are the any other group, including the general preferred choice for borrowing. Almost one- public (23%). American Indians were quarter of all respondents named a bank, also more likely to borrow from family credit union, or savings and loans as their members (22% vs. 9%), friends (12% vs. lender. Other popular choices were home 5%), and payday lenders (4% vs. 1%) equity loans (17%) and credit cards (16%). than the general 45+ general public. • Among all African Americans, over the • Hispanics’ first choice for borrowing was past two years, family members were the home equity loans (13%), followed by lenders of choice for one. Next most family members (12%) and banks/credit popular were banks (13%) and credit unions/personal savings (12%). cards (13%). African Americans were also FIGURE 10: REASONS FOR SAVING BY AGE Q: Please answer ‘yes‘ or ‘no‘ if you are saving for any of these reasons (% yes). Base: n=1018, Ages: 45–54 n=367; 55–64 n=333; 65+ n=272 90% For retirement 83% 52% 78% To build an emergency fund 69% 61% 63% For vacation, wedding, 56% or special event 35% 44% To pay off debts 27% 17% 36% To pay school tuition 11% 8% 13% To purchase a home 8% 2% 8% To start a business 3% 2% Age 45–54 55–64 65+ Shopping for Loans An even larger proportion of Asians (71%) AARP encourages consumers to comparison said they comparison-shopped. Non- shop for interest rates and loan terms in order Hispanic whites (66%), Hispanics (60%), to avoid predatory lending practices and get African Americans (52%), and American the best loan possible. Two-thirds (66%) of Indians (47%) comparison-shop before 26 the 45+ general public said they shop for the taking a loan. See Figure 12, p. 27. Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey best interest rate before borrowing money. FIGURE 11: BORROWING BEHAVIOR BY RACE/ETHNICITY Q: In the past two years, have you ever borrowed from the following places? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Bank loan/credit union/savings and loan Church or religious institutions Total General Public 23 % Total General Public 3% American Indian 27% African American 7% Non-Hispanic White 24% Asian 6% Asian 19% American Indian 5% African American 13% Non-Hispanic White 3% Hispanic 12% Hispanic 3% Home equity loan/loan against your home Payday advance lenders Total General Public 17% Total General Public 1% Non-Hispanic White 18% Hispanic 6% Hispanic 13% African American 4% Asian 13% American Indian 4% African American 9% Asian 2% Non-Hispanic White 1% Credit cards Total General Public 16 % Ethnic or community-based associations Non-Hispanic White 16% Total General Public 1% African American 13% American Indian 3% Asian 12% African American 2% American Indian 11% Hispanic 2% Hispanic 9% Asian 1% Family member Non-Hispanic White 1% Total General Public 9% Rotating savings and credit associations, American Indian 22% such as kye, tanda, circles, partners, su-su African American 20% Total General Public 1% Hispanic 12% African American 2% Asian 9% Hispanic 2% Non-Hispanic White 8% Non-Hispanic White 1% Friend Asian 1% American Indian 1% Total General Public 5% African American 14% Other (Specify) American Indian 12% Total General Public 1% Hispanic 7% Hispanic 2% Non-Hispanic White 4% Non-Hispanic White 1% Asian 2% Asian 1% American Indian 1% African American – Banking on Quality, However, all groups also assign a higher level of importance to choosing a place Convenience, and Safety to cash a check compared with choosing Older Americans have many banking their savings venue. See Figure 13, p. 28 choices: from traditional full-service and 14, p. 29. banks to hybrid banking centers to 27 Other noteworthy findings include: Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey alternative financial services. Consumers are utilizing all of these choices, and • Hispanics favor banking locations with others, for a range of reasons. Current personnel who speak languages other findings show that ethnic groups are than English. more prone than the general population • More women than men value the to use alternative banking options like reputation of an institution. payday lenders and check-cashing outlets. However, we wanted to understand • Low-income consumers and consumers why people choose a place to conduct with a high school education or less are financial transactions. Is it because the more likely than those with higher business is centrally located in their incomes or college graduates to choose neighborhood? Could it be that their a location based on convenience. business of choice provides good banking options? Alternatively, do people choose Credit Card Usage a place to bank simply because the Credit card usage is prevalent in American institution is familiar? society. Today, credit cards are so widely We asked two questions: “Why do you accepted that they are preferred over cash choose this place to save money?” and as a form of payment. Credit card providers “How important are the following things make it extremely easy to use credit cards when choosing a place to cash a check?” by making them more accessible to Overall, we learned that groups often consumers and more widely accepted at choose locations to save and conduct retail locations. This research supports the checking business for similar reasons. view that the majority of the general public FIGURE 12: THOSE WHO SHOPPED FOR THE BEST LOAN INTEREST RATE BY RACE/ETHNICITY Q: Do you shop for the best interest rate before borrowing the money? Base: Total General Public n=723, Samples: Non-Hispanic White n=622, African American n=149, Hispanic n=109, Asian n=122, American Indian n=106 2% Total General Public 66% 30% 2% 2% Asian 71% 26% 2% 2% Non-Hispanic White 66% 30% 2% Hispanic 60% 39% 1% African American 52% 44% 1% 3% American Indian 47% 51% 2% 1% Yes No Don’t Know (VOL.) Refused/No Answer FIGURE 13: IMPORTANT FACTORS WHEN CHOOSING A PLACE TO SAVE Q: Why do you choose this place to save money? Base: Total General Public n=1018, Samples: Non-Hispanic White n=910, African American n=168, Hispanic n=108, Asian n=206, American Indian n=110 Safe location 28 Total General Public 62% Hispanic 70% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey American Indian 65% African American 63% Non-Hispanic White 61% Asian 57% Convenient location Total General Public 61% American Indian 71% Hispanic 64% Non-Hispanic White 60% African American 59% Asian 54% Quality of service Total General Public 58% American Indian 62% Non-Hispanic White 58% African American 56% Hispanic 53% Asian 48% Reputation or name Total General Public 51% American Indian 59% Non-Hispanic White 51% Hispanic 48% African American 46% Asian 40% Banking options (if necessary: the number or types of different services offered by the bank) Total General Public 48% American Indian 55% African American 52% Non-Hispanic White 47% Hispanic 44% Asian 43% They speak languages other Costs than English there Total General Public 35% Total General Public 13% Hispanic 42% Hispanic 36% American Indian 40% African American 23% African American 37% American Indian 18% Non-Hispanic White 35% Asian 14% Asian 34% Non-Hispanic White 11% Don’t have to give too much Been going there for years/ personal information Been with them a long time Total General Public 24% Total General Public 3% African American 31% American Indian 6% American Indian 27% Non-Hispanic White 3% Asian 26% Asian 3% Non-Hispanic White 23% African American 2% Hispanic 18% Hispanic – FIGURE 14: IMPORTANT FACTORS WHEN CHOOSING A PLACE TO CASH A CHECK Q: How important are the following things when choosing a place to cash a check? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Quality of service 91% 29 Total General Public Non-Hispanic White 92% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey African American 90% Asian 90% Hispanic 89% American Indian 88% Convenient location Total General Public 87% Non-Hispanic White 88% Asian 86% African American 85% Hispanic 82% American Indian 79% Safe location Total General Public 85% African American 88% Hispanic 87% Non-Hispanic White 86% Asian 83% American Indian 81% Reputation or name Total General Public 77% African American 83% Non-Hispanic White 78% Hispanic 78% Asian 75% American Indian 63% Costs Total General Public 76% Non-Hispanic White 76% African American 76% Asian 72% Hispanic 70% American Indian 68% Banking options Total General Public 73% African American 77% Non-Hispanic White 72% Hispanic 69% American Indian 69% Asian 61% continued on next page FIGURE 14: IMPORTANT FACTORS WHEN CHOOSING A PLACE TO CASH A CHECK, continued Q: How important are the following things when choosing a place to cash a check? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 30 Don’t have to give too much personal information Total General Public 70% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Asian 75% African American 72% Non-Hispanic White 71% American Indian 71% Hispanic 67% They speak languages other than English there Total General Public 23% Hispanic 70% African American 45% American Indian 35% Asian 28% Non-Hispanic White 20% FIGURE 15: CREDIT CARD USAGE BY RACE/ETHNICITY Q: Do you use a credit card—not connected to your bank account such as an American Express, VISA, Mastercard, Discover, or department store card? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Total General Public 67% 28% – 5% Asian 78% 20% – 2% Non-Hispanic White 72% 24% – 4% American Indian 42% 53% – 6% African American 37% 56% – 7% Hispanic 34% 64% – 3% Yes No – Don’t Know (VOL.) Refused (VOL.) FIGURE 16: CREDIT CARD USAGE BY INCOME Q: Do you use a credit card—not connected to your bank account such as an American Express, VISA, Mastercard, Discover, or department store card? Base: Total General Public n=1509, Income: Under 20K n=192, 20K– <40K n=245, 40K– <60K n=182, 60K– <100K n=213, >100K n=176 Under 20K 38% 60% – 2% 20K – < 40K 65% 34% – 1% 40K – < 60K 82% 15% 1% 1% 60K – <100K 81% 18% –– >100K 78% 10% – 1% Yes No Don’t Know (VOL.) Refused (VOL.) age 45+ uses credit cards in their financial Over the past two years, from one-fifth to transactions (67%). However, the majority almost one-third of the general population of 45+ African Americans (56%), Hispanics participated in major purchases; 30% have (64%), and American Indians (53%) are not purchased a car; 23% have purchased a using credit cards. See Figure 15, p. 30. home. Far fewer (7%) have gotten a student 31 Asian Americans emerge as top users of loan in the past two years. Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey credit cards, with almost eight in 10 saying One finding is particularly interesting. they use a credit card provided by More Asians (36%) than African Americans American Express, Visa, or MasterCard (18%), Hispanics (20%), American Indians (78%). Fewer American Indians age 45+ (16%), non-Hispanic whites (24%), or (42%), African Americans (37%), and members of the general public (23%) Hispanics (34%) report using credit cards. acquired home mortgages in the past It is noteworthy that, compared with the two years. general public, few African Americans and We also asked about engaging in four Hispanics report using credit cards. More behaviors we deemed risky because they than half in each group (52% of African are expensive ways to conduct business Americans and 51% of Hispanics) report and tend to lead consumers into cycles of they are saving to pay off debts. By debt. The behaviors are renting-to-own an comparison, less than a third of the general appliance or furniture; cashing a check at a population is saving to pay off debts (30%). check-cashing outlet; pawning a personal There is a positive relationship among item for cash or credit; and getting a income, education, and credit card usage. payday loan. As stated earlier, many people That is, those with higher incomes and do not have checking or savings accounts. those with more education more frequently However, we found that less than 10% of report using credit cards than those with the general public say that they participate lower incomes or those with less education. in any of these risky behaviors. See Figure 16, p. 30 and Figure 17, p. 33. Participation varied across the multicul- tural subgroups. Fewer than 10% of the Other Financial Pursuits general populations have used check-cashing Next, we discuss the purchases and outlets, payday lenders, and pawnshops in the financial transactions in which people past two years. However, African American, have engaged over the past two years, Hispanic, Asian American, and American probing how consumers are spending their Indian consumers were up to four times as money. We queried about seven items, likely as members of the general survey divided into two categories. We listed seven population to have done so. Additionally, items, three that we categorized as major African Americans and Hispanics were far purchases and four that we categorized as more likely to have rented-to-own an risky behaviors. We asked: “Please tell me appliance or furniture and have used a if you have done the following in the past check-cashing outlet than the 45+ general two years.” public. See Figure 18, p. 33. Other findings include: Trade Commission (FTC) released a study describing the situation of millions of • Lower income consumers participate in Americans. The FTC found that 25 million the four risky behaviors more than those adults 18+—11.2 percent of the adult with higher income do. population—had fallen victim to fraud in 32 • Regardless of income, African Americans general. Beales (2002) reported that among Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey and Hispanics more often frequent rent- the ID theft complaints received by the to-own stores and check-cashing outlets FTC, 10% were made by consumers age 60 compared to Asians, American Indians, and over. However, Beales also found that and non-Hispanic whites. the experiences of older adults age 60+ do not vary much from those age 60 and • Age also emerged as an important under. The study suggests that lower rates factor relating to spending behavior. of reporting identity theft by older adults Those in the 45 to 54 age categories may be attributed to their reluctance to were not only more likely than those report victimization.9 65+ to participate in all of the positive Similarly, others propose that older major purchases (getting a car loan, adults are more vulnerable when dealing home mortgage, or student loan), but with ID theft (Newman & McNally, 2005).10 also more likely than people 65+ to We wanted to better understand the participate in the risky behaviors. See actions that consumers have taken in the Figure 19, p. 34. past two years to protect themselves from fraud and identity theft. Based on previous Protecting One’s Most Prized AARP research, and in conjunction with Possession: Identity what we have learned from the FTC, we Protecting Financial Privacy developed a list of behaviors, which, if Consumers are increasingly concerned followed, will help consumers improve about identity theft, fraud, and security of control of their financial privacy. The their financial information. Among victims seven items divide into reactive and of ID theft, Synovate (2003) found that non- proactive steps. white victims expressed more apprehension We asked respondents: “Please tell me if than white victims regarding the possibility you have taken any of the following actions of being a repeat target for ID theft.8 Many in the past two years.” They answered with older consumers have acted to protect the following. See Figure 20, p. 35. their financial identity. In 2004, the Federal 8 Synovate (2003). Federal Trade Commission–Identity Theft Survey Report. McLean, VA. www.ftc.gov/os/2003/09/synovatereport.pdf 9 Beales, H. (2002). Prepared statement of the Federal Trade Commission on Identity Theft: The Impact on Seniors Before the Senate Special Committee on Aging. www.ftc.gov/os/2002/07/020718identitytheft.htm 10 Newman, G.R. and McNally, M.M. (2005). Identity Theft Literature Review. Research presented at the National Institute of Justice Focus Group Meeting on January 27, 2005. FIGURE 17: CREDIT CARD USAGE BY EDUCATION Q: Do you use a credit card? Base: Total General Public n=1509, Education: HS or Less n=567, Some College n=307, College Grad or More n=550 HS or Less 56% 39% – 5% Some College 80% 16% – 4% 33 College Grad or More 82% 14% – 3% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Yes No – Don’t Know Refused FIGURE 18: FINANCIAL ACTIVITIES OVER THE PAST TWO YEARS BY RACE/ETHNICITY Q: Please tell me if you have done the following in the past two years? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Gotten a car loan Rented to own an appliance or furniture Total General Public 30% Total General Public 4% Non-Hispanic White 32% African American 12% American Indian 30% Hispanic 12% Asian 29% American Indian 8% African American 22% Asian 5% Hispanic 22% Non-Hispanic White 3% Gotten a home mortgage Pawned a personal item for cash or credit Total General Public 23% Total General Public 4% Asian 36% Hispanic 10% Non-Hispanic White 24% American Indian 8% Hispanic 20% African American 6% African American 18% Asian 5% American Indian 16% Non-Hispanic White 4% Cashed a check at a check-cashing outlet Gotten a pay day loan Total General Public 7% Total General Public 2% Hispanic 23% Hispanic 8% African American 17% American Indian 7% Asian 9% African American 5% American Indian 9% Asian 4% Non-Hispanic White 5% Non-Hispanic White 1% Gotten a student loan Total General Public 7% Hispanic 9% Asian 7% Non-Hispanic White 6% African American 5% American Indian 4% FIGURE 19: FINANCIAL ACTIVITIES OVER THE PAST TWO YEARS BY AGE Q: Please tell me if you have done the following in the past two years? Base: n=1509, Age: 45–54; 55–64; 65+ Gotten a car loan 42% 33% 19% 34 Gotten a home mortgage 31% 24% 15% Gotten a student loan 12% 7% 2% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Cashed a check at a check-cashing outlet 7% 9% 6% Pawned a personal item for cash or credit 6% 5% 2% Rented to own an appliance or furniture 5% 3%5% Gotten a pay day loan 3% – 2% 45–54 55–64 65+ Ninety-six percent of the 45+ public has receiving unsolicited offers by mail (27%). taken at least one step to protect their Results across racial subgroups are financial information. inconsistent, but a general trend suggests Reactive behaviors respond to an outward that African Americans, Hispanics, Asians, trigger, such as shredding documents after and American Indians are slightly less receiving mail or credit card statements. likely than the general public to participate These behaviors seem to be more appealing in these protective steps. There are several to consumers perhaps because it reminds exceptions, most noteworthy of which is them to initiate the action. For example, that African Americans are more likely among our respondents, in the past two than the general public to say they have years, the vast majority refused to give ordered and reviewed a copy of their credit out personal information over the phone report in the past two years (38% vs. 31%). unless the individual made the call (86%), In general, participating in one regularly reviewed credit card statements protective factor increases the likelihood of (77%), and shredded unwanted personal participating in another. Several character- financial mail (75%). istics were linked to participation in any Proactive behaviors require consumers to one of the protective behaviors overall. initiate an action without outward triggers. They are: Consumers seem less likely to engage in • Having some college education or more; proactive protective steps. For example, compared to the reactive behaviors, far • Having a checking account; fewer respondents took proactive steps. • Having an optimistic financial outlook; In the past two years, proactive respondents carried fewer credit or identification cards • Being a non-Hispanic white; (60%), signed up for the national do-not- • Being younger (45 to 54); call list (54%), ordered a copy of their credit report (31%), or called the three • Owning a home. major credit companies to opt out of FIGURE 20: PROTECTIVE FACTORS IN WHICH PEOPLE PARTICIPATE BY RACE/ETHNICITY Q: Please tell me if you have taken any of the following actions in the past two years? Base: Total General Public n=1509, Samples: Non-Hispanic White n=1299, African American n=300, Hispanic n=300, Asian n=300, American Indian n=200 Regularly refused to give out personal information like your Social Security Reactive Behaviors number over the phone unless you have initiated the call 35 Total General Public 86% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Non-Hispanic White 87% American Indian 81% African American 79% Asian 73% Hispanic 63% Regularly reviewed your credit card or other financial statements Total General Public 77% Non-Hispanic White 79% Asian 75% American Indian 62% African American 62% Hispanic 52% Regularly shredded or destroyed credit card receipts, credit applications, bank checks, or financial statements Total General Public 75% Non-Hispanic White 77% American Indian 70% African American 69% Asian 69% Hispanic 45% Proactive Behaviors Regularly carry fewer credit or identification cards Total General Public 60% Asian 71% Non-Hispanic White 62% African American 56% American Indian 55% Hispanic 42% Signed up for national or state telemarketing do-not-call list Total General Public 54% Non-Hispanic White 58% Asian 48% American Indian 36% African American 33% Hispanic 26% Ordered and reviewed a copy of your credit report Total General Public 31% African American 38% Non-Hispanic White 30% Hispanic 30% American Indian 30% Asian 29% Told the three major credit bureaus that you do not want to receive unsolicited financial offers in the mail Total General Public 27% American Indian 35% Asian 30% Non-Hispanic White 28% African American 27% Hispanic 25% FIGURE 21: PROTECTIVE FACTORS IN WHICH PEOPLE PARTICIPATE BY INCOME Q: Think for a moment about your personal debt on which you currently make interest payments. I am talking about debts you partially pay off each month for things like mortgages, credit cards, personal loans, or car loans. Base: Total General Public n=1509, Income: Under 20K n=192, 20K– <40K n=245, 40K– <60K n=182, 60K– <100K n=213, >100K n=176 36 About as much as you can handle financially Under 20K 34% Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey 40K – < 60K 45% 20K – < 40K 39% 60K – <100K 37% >100K 21% Don’t have any personal debt (VOL.) Under 20K 33% 20K – < 40K 17% 40K – < 60K 14% >100K 13% 60K – <100K 12% More than you can handle financially Under 20K 17% 20K – < 40K 8% 40K – < 60K 3% 60K – <100K 2% >100K 1% You could handle more debt than you currently have Under 20K 14% >100K 64% 60K – <100K 49% 40K – < 60K 36% 20K – < 40K 33% Don’t Know (VOL.) Under 20K 1% 40K – < 60K 2% >100K 2% 20K – < 40K 1% 60K – <100K – Refused (VOL.) Under 20K 1% 20K – < 40K 1% 40K – < 60K 1% 60K – <100K – >100K – Summary and Trends Americans are also in more debt. Ironically, younger Americans are also • More Americans are concerned about more likely to be concerned about having enough money for health care meeting basic living expenses like expenses, including prescription drug electricity, utilities, heating, cooling, 37 costs than any other reason listed (64%). telephone, grocery bills, and food than Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Similarly, the majority of Americans are are older Americans. concerned about affording basic living • When it comes to being conscientious expenses—utilities, heating and cooling, about identity theft, an overwhelming telephone, grocery bills, and food. majority of respondents (96%) have Furthermore, African Americans, taken at least one protective step to Hispanics, Asians, and American safeguard their financial identity. Indians are far more concerned about having enough money to meet all of • Women are more concerned about the needs mentioned. affording basic living expenses than are men. They also have more debt than • Although a large proportion of men. At the same time, men are more Americans report having spent money likely than women to report that they on major purchases including home plan to do home remodeling, purchase mortgages and cars in the past two a car, and move to a new location years, many plan to continue making within the next two years. major purchases in the next two years. Most people, however, are still diligent • In general, homeowners and people about saving, with the majority (68%) with bank accounts are more likely to saying that they are saving. Moreover, say that they are currently saving money they are focusing most of their savings than renters and those without bank on retirement (76%). Despite saving for accounts. They are also less likely than retirement and their heightened renters and the un-banked to frequent concerns about daily living expenses, alternative financial institutions like Americans are planning for leisure pawnshops and payday lenders. activity, with 63% saying they are going on vacation within the next two years. • Definite trends emerged for several groups. Younger people (ages 45 to 54) are more financially active than people age 65+; they report spending more, saving more, and say they are more likely to make a major financial commitment in the next few years, such as purchasing a car or homes. Younger Findings by Hispanics Race/Ethnicity Hispanics’ greatest concern of all the listed possibilities is having enough money for African Americans emergency expenses. Almost six in 10 38 African Americans are extremely concerned Hispanics (59%) say they are not saving any about having enough money as they age. money at all. However, more Hispanics are Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Compared to the general public rate of saving to purchase a home (30%) than any 50%, more than two-thirds of African other group. One-third reports they have no Americans (68%) are concerned about credit card debt (35%). A greater proportion basic monthly bills including electricity, of Hispanics than any other ethnic group heating and cooling, telephone, grocery and the 45+ general public say they will be bills, and food. In fact, African Americans starting a business in the next two years are more concerned than the other (24%). Furthermore, as in the general public subgroups about most of the items named (63%), Hispanics (62%) plan to take in the survey. Interestingly, more African vacation in the next two years. Cash seems Americans are concerned about being to be the predominant method for financial taken care of as they age (61%) than say transactions for many 45+ Hispanics with they will be responsible for caring for approximately one-fourth saying they do grandchildren or aging family members in not have checking accounts, use money the next two years (46%). This suggests that orders, cashier checks, or bank checks. while a significant proportion of older In the past two years, Hispanics were African Americans are committed to more likely than the general public to providing care for the young and the older frequent alternative financial institutions generations, they are less certain that the including check cashing outlets and younger generation shares this payday lenders. Hispanics are almost commitment to caring for them. equally as likely to borrow against their African Americans are almost half as homes (13%) as they are to borrow from likely as the general public to report family members (12%) and banks (12%). owning a credit card, but they are more likely to say that they plan to pay off debt Asians in the next two years. Furthermore, African While Asian Americans often mirrored the Americans are almost three times as likely general population on many accounts, as the general population to say they have they are more concerned than the general more debt than they can handle (17% vs. public about finances and making financial 6%). In the event of an emergency, African ends meet. Many Asians are concerned Americans are as likely to borrow from a about paying for health care costs like bank as they are to borrow from a family prescription medicine (67%). The vast member. Furthermore, African Americans majority of Asians report having savings are more likely than the other ethnic groups accounts (65%), and checking accounts to say they have ordered and reviewed a copy (89%), and their preferred choice for getting of their credit report in the past two years. quick money in the event of an emergency (27%) and family members (22%) in the is their savings account (22%). Asians are past two years. Furthermore, over half far more likely than the other subgroups to (54%) of 45+ American Indians say they are say they carry fewer identification cards in considerable debt. with them over the past two years (71%). 39 Although homeownership is highest Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey among younger Asians 45 to 54 (86%), overall it is prevalent in the Asian community across all age groups (81%). Asians (36%) are also more likely than the other racial groups and the general population (23%) to say that they have gotten a home mortgage in the past two years. Asians are more likely than all other subgroups to say that they shop for the best interest rate before acquiring a loan. American Indians American Indians’ top concerns are having enough money for emergency expenses (62%) and having funds to cover basic utilities like electricity, utilities, heating and cooling, telephone, grocery bills, and food (61%). Three quarters of American Indians are saving for retirement (76%), and fewer are saving to pay off debts (45%). They are the least likely of all racial groups and the general public (63%) to say they are saving money to go on vacation (47%) in the next two years. Far fewer American Indians (50%) report that they will be paying medical bills in the next two years, compared with the general public (61%). American Indians are second only to African Americans (46%) in stating they will care for grandchildren or aging family members in the next two years (41%). Half of American Indians do not have a credit card, so few borrow from credit cards (11%) when they need cash. Between one- fifth and one-quarter borrowed from banks 40 Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community 2004 Multicultural Survey Acknowledgements Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45+ Community was conducted by AARP Knowledge Management for AARP’s Brand Management Department with the assistance of AARP’s Consumer Protection Team, AARP’s Office of Diversity, and the Office of Public Policy. We would also like to give a special thanks to our AARP and external colleagues, who supported us in survey development, data feedback, and helped in understanding some of the findings: Michael Murray, AARP Brand Management Neal Walters, Public Policy Institute Mike Hilker, AARP Brand Management DaCosta Mason, State Affairs Richard Gellman, AARP Brand Management Jo Reed, Federal Affairs Muriel Cooper, AARP Communications Carmelita Tursi, AARP California Barbara Foelber, AARP Communications Susan Wang, AARP California Devra Cohen, Community Initiatives Eddie Rivas, AARP Alaska Lona Choi-Allum, AARP Knowledge Management Margaret Simms, Joint Center for Political and Gail Kutner, AARP Knowledge Management Economic Studies Sislena Grocer Ledbetter, AARP Knowledge Cheryl Hill Lee, The Washington Urban League Management Hilary Shelton, NAACP Jeff Love, AARP Knowledge Management Zelna Joseph, National Council of Negro Women Shereen Remez, AARP Knowledge Management Tony Rodriguez, National Consumer Law Center Lily Liu, AARP Knowledge Management Carlos Soto, AARP and Hispanic Corporate Council Marta Arbelaez, AARP Diversity Aryani Ong, Organization of Chinese Americans Aiyshen Padilla, AARP Diversity Vivien Kao, Chinese Culture and Community Service Ron LeGrand, AARP Diversity Center, Inc. Darlene Perry, AARP Diversity Annie Tsai, Chinese Culture and Community Service Nileeni Meegama, AARP Member Value Center, Inc. Jeanne Anthony, AARP Member Value Alan Allery, National Resource Center for Native Jerry Florence, AARP AED Membership/Director, American Aging AARP Foundation Judy Wang, Georgetown University Medical Center Jennie Chin Hansen, On Lok, Inc and AARP Board of Directors This report was prepared by Sislena Grocer Ledbetter and Lona Choi-Allum, both of AARP Knowledge Management. AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have Bridget Small, Consumer Protection For additional information, contact Sislena Grocer Sally Hurme, Consumer Protection independence, choice and control in ways that are beneficial and affordable to them and Ledbetter at 202-434-6294. Jennifer Leach, Consumer Protection society as a whole. We produce AARP The Magazine, published bimonthly; AARP Bulletin, Andrés Castillo, Consumer Protection ©2005 AARP Reprinting with Permission our monthly newspaper; AARP Segunda Juventud, our bimonthly magazine in Spanish Bonita Brady, AARP State and National Initiatives AARP Knowledge Management and English; NRTA Live & Learn, our quarterly newsletter for 50+ educators; and our 601 E Street NW website, www.aarp.org. AARP Foundation is an affiliated charity that provides security, George Gaberlavage, Public Policy Institute Washington DC 20049 Sharon Hermanson, Public Policy Institute protection, and empowerment to older persons in need with support from thousands of www.aarp.org/research volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Multicultural Study 601 E Street, NW Washington DC 20049 1-888-OUR-AARP (1-888-687-2277) www.aarp.org 2004 Perspectives Past, Present and Future: Traditional and © 2005 AARP May be copied only for noncommercial purposes and with attribution; permission required for all other purposes. Alternative Financial Practices of the 45+ Community D18329