Published On: Tue, Sep 11th, 2018

New survey finds financial crisis still confusing for many Americans

It’s been 10 years since the collapse of Lehman Brothers which triggered a massive financial crisis that reshaped the world we live in. A decade later, corporate profits are at record highs, the economy is logging its best performance in nearly four years and the stock market has more than quadrupled in value. However for millions of consumers the scars are still raw, with 65 percent of respondents saying they have yet to fully recover financially, and the large majority reporting they remain distrustful of Wall Street.

In a new report, “Betterment Consumer Financial Perspectives Report: 10 Years After the Crash,” Betterment, the largest, independent online financial advisor, details the findings from 2,000 U.S. respondents on the effect the financial crisis had not only on their stock market portfolios, but also their trust in Wall Street and their attitudes toward saving and investing.

photo Gerd Altmann via pixabay

Key findings of the report include:

  • People don’t understand what caused the financial crisis, remain in the dark about performance:
    • 79% say they don’t fully understand what happened during or caused the financial crisis
    • Roughly half of people think the S&P 500 has not gone up at all in the past 10 years, and 18% think it’s actually gone down since 2008
    • Despite this lack of understanding, Wall Street’s reputation took a hit: 83% don’t think Wall Street is any more ethical than it was in 2008
  • The crisis has had a lasting impact on financial behavior: The average reported loss was less than $5,000, but the hit may have lasting effects on saving and investing habits.
    • More than 1 in 4 people stopped saving for retirement or contributing to their 401(k)
    • 2 in 3 say they invest less today than they did in 2008
    • 29% of respondents said they are making a concerted effort to save more today than they were in 2008
  • Those who invested and lost are the most likely to feel recovered and optimistic:
    • 80% of people investing in 2008 lost money, but feel more recovered than their non-investing counterparts: 41% feel fully recovered
    • Half are investing as much or more than they did 10 years ago, and nearly a quarter consider themselves even more risk tolerant

“The data reinforced a lot of what we already feel and see on Wall Street: people are slow to trust big banks again, and understandably worried this will happen again. But what we find extremely hopeful is the staying power of those who rode the wave and came out on the other side,” said Dan Egan, VP of Behavioral Finance and Investments at Betterment. “People who were investing in 2008 felt the losses, but also witnessed the recovery.They know another dip is inevitable, but know that as long as they don’t get greedy or fearful, the rewards outweigh the costs.”

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