America's more frugal, but will it last?
There's no question Americans are becoming more frugal. Half of them are cutting back on leisure activities and buying clothes, according to a soon-to-be-released survey from First Command Financial Services in Fort Worth, Texas. Nearly the same percentage are shopping discount stores and increasing coupon use.
So will the Great Recession permanently change spending habits the way that the Great Depression and World War II did for previous generations?
"Depending on the duration of this crisis, a new sense of frugal living might well emerge among younger and older Americans," writes Glen Elder, author of "Children of the Great Depression," in an e-mail.
Already, some Americans say they are permanently changing their habits, according to the unreleased First Command Financial Behaviors Index. The percentage of Americans who say they have cut back for good has risen from 14 percent in February to 23 percent in June. Some 57 percent said the recession would have a long-term effect on their spending behavior; 48 percent agreed that they have "embraced frugality as a way of life."
About a quarter of US consumers are already "true frugals," says Aaron Reid, chief behavioral scientist at Sentient Decision Science, which conducts the monthly survey of 1,000 Americans for First Command Financial Services. Another quarter are "foul-weather frugals," who will go back to their old spending patterns once the economy recovers. Another 20 percent are free spirits, who think living paycheck to paycheck is perfectly acceptable.
The most telling group, however, is the 30 percent of consumers "scared straight" by the recession, who could move into the true frugal group, he says.
Companies jump on board
Certainly, companies are picking up on the frugality trend.
"It's really a booming issue," says John DeSantis, president of the socially responsible hedge fund Civic Capital Group in Boston, who reads more than 1,000 corporate annual reports a year. This year, frugality showed up for the first time in many reports, with companies positioning their products as good value for the money.
Americans' savings rates, too, are on the upswing.
Not everyone's a believer, however, that attitudes will change permanently."There are a lot of people who say we're going to have this shift toward frugality. I don't see it," says Jean Twenge, coauthor of the "Narcissism Epidemic," a new book on young people's attitudes, which came out in April. "The idea that I deserve the big house and the big car is so prevalent.... It will be extremely hard for young people to go back to the idea that you shouldn't use credit."
In many ways, the focus on the individual – and the rising sense of personal entitlement – dates back to the Renaissance, she says. Certain periods, such as the Depression, World War II, and the 1950s, pushed back against these trends. "But when [the trends] came back, they were stronger than ever."
– Have you changed your spending habits for good?