How has the American Dream changed since the recession?
Gerri: What does the American dream mean to you? There’s new research that talks about how American’s views of that dream are changing. And joining me to discuss that is Tom O'Donnell, he is Senior Vice President - Quality for Chase, the website is www.chase.com/mindfulspending.
Tom, tell me a little bit about the research and what you're finding in terms of what Americans see now as their American dream?
Tom: What we’re seeing today as far as American are concerned is that the American dream is very much alive and well. Americans definitely remain a very optimistic group and they’re looking for some of those same things that you might have historically thought would be part of the American dream like home ownership, and being married, and having children. But there are some real elements of reality that Americans have now introduced into their dream and it definitely impacts their view about achieving that dream and what it will take to get there.
Gerri: Tell me about some of those findings.
Tom: Sure. What we’re seeing and the research has indicated it, the American dream has some real core parts to it today. Home ownership and home purchase remains the largest part of the American dream. In fact, 77% of respondents indicated that home purchase was part of their dream. Being married, having children, a college education, a retirement, they all came in next and they were about 45% to 50% in terms of respondents and how they viewed those elements as part of their dream. And so there’s many of those factors that people are looking at.
But then if you take a look at home purchase, for example, which is the leading part of the American dream, Americans now also recognize that achieving that dream requires some realistic elements in their financials. They need to probably qualify for a mortgage, they need to have good credit in order to get there. They recognize that owning a home and maintaining the home is part of the package that goes along with that. You don’t just get the home but you have to pay to keep it up. And so there's some real core elements of financial planning and financial management that come along with that home purchase.
Similarly, if you look at just children and having children, that Americans still very much view that as part of their dream. But now they also recognize that having that part of the dream has some real costs to it. In fact, 3 out of 5 respondents believe that you need dual incomes to make ends meet when you have children. And then 2 out of 5 say they have delayed having children because of their financial situation. Again, having the children and having the family is part of the dream but there's now that reality element which is there’s certainly a cost attached to it.
And when it comes to retirement, again retiring at 65, a core component of the American dream, in reaching that goal there seems to be some real roadblocks for respondents. In fact, more than a third feel that it may not be possible to save enough for retirement.
There’s a real balance in the American dream now - there’s the aspirational part which are clearly some big goals that folks have in mind but it’s balanced very much by financial realities that come along with achieving those goals.
Gerri: Tom, at Chase you’ve actually sponsored some very interesting research on various financial topics. One of the ones that I found very interesting - we’ll have to have you back on the show to talk about is Born to Spend and Nature versus Nurture when it comes to your spending and your borrowing habits. Tell me a little bit more about the research you're doing and how that informs what you’re doing at Chase?
Tom: Sure. When we talk about Born to Spend, that really came out of our research to try to understand not what customers do but why they do it when it comes to managing their finances, and what's really behind their motivations and their actions.
What we found in Born to Spend is that for many consumers the downturn in the economy was a very challenging time and they adapted some tactics to help them get through that. They cut their spending, they paired back on their budgets, and they took some actions that really were meant to help them get through those difficult times in the short term.
And the question that we’re asking now is how are consumers able to turn those short term tactics into long term habits and to take those things that they may have adapted just to impose a short term personal austerity program and make it part of their ongoing management of their finances so that they’re what we view as spending mindfully?
So they have a plan for their purchases, they have an overall structure in place so that the dollars that they spend, and they may need to do it because life happens to all of us, then we need to spend whether it's to fix the car, or to fix the house, or something else, the expenditures will be there, but can you take a very mindful approach to doing that? And can you do that as part of your ongoing habits rather than some special or short term activity that you need to get from from here to there?
Gerri: Tom, I want to make sure we have time for you to describe Blueprint because Chase Blueprint is a very unique product in the credit card industry and it offers consumers some real advantages, so tell us how it works.
Tom: Chase Blueprint was developed to help customers give a real structure to the management of their credit card. Because when we talked to consumers, what they told us was they needed more control, they need simplicity, they needed predictability in managing their credit card particularly in managing their credit card balance or managing their large purchases.
And what Blueprint allows the customer to do is to take that large purchase or take that balance and divide it up into monthly payment so that they know very predictably how much do they need to pay each month in order to either pay off that large purchase or pay down that balance.
So instead of having a $2,000 balance and not being sure what the plan is or how to approach that, Blueprint allows customers to take that $2,000 balance and turn it into a monthly payment so that they can they can very much have control over what it will take to execute that paydown plan.
And we’ve seen this to be very, very successful for customers. We have nearly 3 million plans that are in place and more than 90% of the customers who have built those plans have followed through and met their goals which is just a great achievement for that individual. They’re able to see some real success in terms of the management of their dollars and it really helps them with that thought of now having mindful direct approach to managing my spending, and Blueprint is at the core of that.
Gerri: The other cool thing about Blueprint is that usually if you’re paying a balance on a credit card people stop using that card because they know that every purchase they make will incur interest. (With Blueprint) you can actually split up your purchases - the ones you’re paying off over time and the ones you’re paying in full each month. There's nothing else like that on the market.
Tom: Clearly, what we heard from consumers was while they may be carrying a balance because they had to make a large purchase, like they need to replace the refrigerator or they needed to get the car fixed, they still have other purchases that they want to make every week, every day. It's the trip to the pharmacy, the trip to the supermarket, those types of things but they really weren’t planning to pay interest on those, but that’s what happens generally when you're carrying a balance on your credit card.
What Blueprint enables you to do is to really separate those two types of things. Take your everyday purchases and put them into their category and as long as you pay for them every month you don’t incur any interest on those even while you're maintaining that balance.
Instead of having to split up your purchases across multiple products or multiple cards, customers are able to keep all of their spending right in front of them, in one place, but not paying interests on those everyday purchases which is really their plan while they're still paying off that large balance. And we think what it enables customers to do is have that right combination in one product.