As the holiday shopping season gets underway, underbanked consumers of all income levels are feeling the strain on their wallets and planning to spend conservatively on gifts this year, according to the 2012 Underbanked Financial Sentiment Index released this week by Think Finance, a developer of next-generation online financial products.
The study surveyed 1,000 Americans across income levels who supplement traditional bank accounts with various alternative financial services such as payday loans, prepaid debit cards and direct deposit advances.
Almost half of those surveyed (45%) said they do not expect to have enough money set aside to cover holiday expenses. Eighty-five percent said they will spend the same amount of money or less on gifts this year, with 54% planning to spend $500 or less and 27% planning to spend between $500 and $1,000 on holiday gifts.
Perhaps as a result, almost half of respondents (44%) described their level of stress related to holiday expenses as high or extremely high and 45% said the holiday season brings so much financial pressure that they wish they could skip it altogether.
In addition to counting their pennies this holiday shopping season, a significant amount of underbanked consumers are taking advantage of layaway programs, although they want more financing options. Forty-one percent of respondents said they plan to utilize store layaway programs, including 50% of those in the $75,000 – $99,999 income bracket and 32% of those earning $100,000 or more. However, layaway does not appear to fully satisfy the need for more financing options as approximately two-thirds of those surveyed (68%) reported that they would like to see additional financing options aside from layaway programs and store credit cards.
“The economy has shown gradual improvement in recent years, but everyday Americans are still working hard to cover expenses making holiday spending particularly stressful,” said Ken Rees, CEO, Think Finance. “The fact that people across income levels are turning to layaway makes it clear that we need more financial options.”
Underbanked Americans are reluctant to spend more on holiday shopping this year, but they are starting to feel more optimistic about the direction of the economy and about their own personal financial outlook. Half of those surveyed think they will be better off financially one year from now, and 79% were positive or neutral on the direction of the economy with the majority of those respondents thinking it will get better. The financial optimism contrasts with some challenging realities as 59% reported that they will carry debt into the New Year, including 54% of those who earn $100,000 or more annually. In addition, 41% of respondents said they would only be able to get by for two weeks without a paycheck with an additional 25% saying they could only survive one month.
The 2012 UFSI Underbanked Financial Sentiment Index was conducted online within the United States by Toluna Inc. on behalf of Think Finance. The survey was fielded over the course of eight days in October 2012.