Think it means being rich? Think again

For most Americans, wealth has little to do with money.

That’s according to a new study from the brokerage firm Charles Schwab. Just under 50 percent of people define wealthy as having a lot of money or being able to afford anything they want, while the majority say it means enjoying life’s experiences, living stress-free and having peace of mind, or having loving relationships with family and friends.

When asked how much is required to be considered “wealthy” in America, respondents say it’s an average of $2.4 million — or nearly 30 times the actual median net worth of U.S. households according to the U.S. Census Bureau.

Despite the large amount of money that some Americans use to define wealth, the majority define the term with things that money cannot buy.

Almost two-thirds of people equate wealth with having good physical health versus having lots of money. Fifty-eight percent say wealth is about having gratitude over having money, and 56 percent believe wealth is about building community versus working on one’s career.

“Wealth is often thought of as a lofty, unattainable number that doesn’t apply to most of us, but that’s an old-fashioned notion that needs to be retired,” says Terri Kallsen, executive VP and head of Schwab Investor Services.

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Americans score poorly

On a scale of 1-100, Americans received an average score of 49 in the study, which looked at four factors. Of those factors, people scored  best (64) in their confidence to obtain their financial goals, but the lowest (24) in their ability to stay on track with saving.

Scores for goal setting and financial planning came in below average at 43 and scores for saving and investing came in at 53 out of 100.

The study also identified that people who write down their financial goals scored much higher than those who didn’t. Less than a quarter of people actually have their financial goals in writing.

“We know planning is one of the most fundamental factors of successful investing,” notes Kallsen. “But there is a clear need to make planning and professional advice more accessible and engaging for people, because not enough Americans have written financial plans. It’s one of the most important issues for our industry to address today.”

Millennials have better habits

Despite what other generations might think, millennials have the best financial habits, the study found.

They’re more likely to be focused on planning, to regularly monitor their financial accounts, are more knowledgeable about the fees they pay, and more confident they will reach their financial goals. On top of that, millennials are much more likely to sit down and map out their goals with a financial adviser.

Not all of their spending habits are good, though. Their short-term behavior tends to undermine their long-term goals.

For example, 60 percent of their generation say they spend more than $4 on a cup of coffee. Even more than that — 70 percent — say they spend money on clothes they don’t need.

On top of that, millennials’ debt management skills could use improving. Two-thirds say they don’t always make their student loans and mortgage payments on time, and nearly seven in 10 say they have credit card debt.

As millennials age, though, their habits appear to improve. Among people in their early thirties, nearly 60 percent say their financial health is better than it was five years ago and nearly half say they have a household budget compared to those in their 20s — 35 percent — who admit they do not.

“The positive behavior changes we’re seeing among older millennials are encouraging. With their focus on planning, they’re already poised for success,” says Kallsen. “Much like the generations before them, millennials will advance in their careers, start families, and accumulate wealth — all factors that will lead to even more financial engagement.”

Budgeting & Saving, News

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Article last modified on July 19, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Americans Define Wealth in Very Different Ways - AMP.