Multicultural Study 2004

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Multicultural Study601 E Street, NW Washington DC 20049 1-888-OUR-AARP (1-888-687-2277) www.aarp.org 2005 AARPMay be copied only for noncommercial purposes and with attribution; permission required for all other purposes.D183292004Perspectives Past, Presentand Future: Traditional andAlternative Financial Practicesof the 45 Community

AcknowledgementsPerspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the45 Community was conducted by AARP Knowledge Management for AARP’s Brand ManagementDepartment with the assistance of AARP’s Consumer Protection Team, AARP’s Office of Diversity, andthe Office of Public Policy.We would also like to give a special thanks to our AARP and external colleagues, who supported us insurvey development, data feedback, and helped in understanding some of the findings:Michael Murray, AARP Brand ManagementMike Hilker, AARP Brand ManagementRichard Gellman, AARP Brand ManagementMuriel Cooper, AARP CommunicationsBarbara Foelber, AARP CommunicationsDevra Cohen, Community InitiativesLona Choi-Allum, AARP Knowledge ManagementGail Kutner, AARP Knowledge ManagementSislena Grocer Ledbetter, AARP KnowledgeManagementJeff Love, AARP Knowledge ManagementShereen Remez, AARP Knowledge ManagementLily Liu, AARP Knowledge ManagementMarta Arbelaez, AARP DiversityAiyshen Padilla, AARP DiversityRon LeGrand, AARP DiversityDarlene Perry, AARP DiversityNileeni Meegama, AARP Member ValueJeanne Anthony, AARP Member ValueJerry Florence, AARP AED Membership/Director,AARP FoundationJennie Chin Hansen, On Lok, Inc and AARPBoard of DirectorsBridget Small, Consumer ProtectionSally Hurme, Consumer ProtectionJennifer Leach, Consumer ProtectionAndrés Castillo, Consumer ProtectionBonita Brady, AARP State and National InitiativesGeorge Gaberlavage, Public Policy InstituteSharon Hermanson, Public Policy InstituteNeal Walters, Public Policy InstituteDaCosta Mason, State AffairsJo Reed, Federal AffairsCarmelita Tursi, AARP CaliforniaSusan Wang, AARP CaliforniaEddie Rivas, AARP AlaskaMargaret Simms, Joint Center for Political andEconomic StudiesCheryl Hill Lee, The Washington Urban LeagueHilary Shelton, NAACPZelna Joseph, National Council of Negro WomenTony Rodriguez, National Consumer Law CenterCarlos Soto, AARP and Hispanic Corporate CouncilAryani Ong, Organization of Chinese AmericansVivien Kao, Chinese Culture and Community ServiceCenter, Inc.Annie Tsai, Chinese Culture and Community ServiceCenter, Inc.Alan Allery, National Resource Center for NativeAmerican AgingJudy Wang, Georgetown University Medical CenterThis report was prepared by Sislena Grocer Ledbetter andLona Choi-Allum, both of AARP Knowledge Management.For additional information, contact Sislena GrocerLedbetter at 202-434-6294. 2005 AARP Reprinting with PermissionAARP Knowledge Management601 E Street NWWashington DC 20049www.aarp.org/researchAARP is a nonprofit, nonpartisan membership organization that helps people 50 haveindependence, choice and control in ways that are beneficial and affordable to them andsociety as a whole. We produce AARP The Magazine, published bimonthly; AARP Bulletin,our monthly newspaper; AARP Segunda Juventud, our bimonthly magazine in Spanishand English; NRTA Live & Learn, our quarterly newsletter for 50 educators; and ourwebsite, www.aarp.org. AARP Foundation is an affiliated charity that provides security,protection, and empowerment to older persons in need with support from thousands ofvolunteers, donors, and sponsors. We have staffed offices in all 50 states, the District ofColumbia, Puerto Rico, and the U.S. Virgin Islands.

Perspectives Past, Present, and Future:Traditional and AlternativeFinancial Practices ofthe 45 CommunityFindings from a Multicultural Surveyof Americans 45 and olderContents3 Executive Summary19Spending Behavior321Savings Behavior5 Summary of Findings22Checking Behavior5Major Concerns22Reasons for Saving7Spending Behavior25Borrowing7Saving Behavior26Shopping for Loans7Banking on Quality, Convenience, and Safety27Banking on Quality, Convenience, and Safety8Credit and Debt27Credit Card Usage9Who is Saving31Other Financial Pursuits9Borrowing Behavior32Protecting One’s Most Prized Possession: IdentityProtecting One’s Identity321111IntroductionConclusionsProtecting Financial Privacy37 Summary and Trends13 Detailed Findings38 Findings by Race/Ethnicity1338African AmericansConcerns: Perception and Reality13Financial Perceptions38Hispanics14Major Concerns about Everyday Expenses38Asians17Debt Management39American Indians19Money Management 101Appendix A: Methodological ReportVisit 004 perspectives.htmlAppendix B: Annotated QuestionnaireVisit 004 perspectives.htmlAppendix C: Executive SummaryVisit 004 perspectives.html

FiguresExecutive Summary6 Figure A: Major Concerns By Race/Ethnicity29 Figure B: People Currently Saving Money By Race/EthnicityPerspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45 Community 2004 Multicultural Survey10 Figure C: Protective Factors In Which People Participate By Race/EthnicityDetailed Findings13 Figure 1: Past Financial Perceptions By Race/Ethnicity14 Figure 2: Future Financial Perceptions By Race/Ethnicity15 Figure 3: Major Concerns By Race/Ethnicity16 Figure 4: Financial Pursuits for the Next Two Years by Gender18 Figure 5: Debt Levels By Race/Ethnicity20 Figure 6: Financial Pursuits for the Next Two Years by Race/Ethnicity21 Figure 7: People Currently Saving Money By Race/Ethnicity23 Figure 8: People Who Have Checking Accounts By Race/Ethnicity24 Figure 9: Reasons For Saving By Race/Ethnicity25 Figure 10: Reasons For Saving By Age26 Figure 11: Borrowing Behavior By Race/Ethnicity27 Figure 12: Those Who Shopped For The Best Loan Interest Rate By Race/Ethnicity28 Figure 13: Important Factors When Choosing A Place To Save29 Figure 14: Important Factors When Choosing A Place To Cash A Check30 Figure 15: Credit Card Usage By Race/Ethnicity30 Figure 16: Credit Card Usage By Income33 Figure 17: Credit Card Usage By Education33 Figure 18: Financial Activities Over The Past Two Years By Race/Ethnicity34 Figure 19: Financial Activities Over The Past Two Years By Age35 Figure 20: Protective Factors In Which People Participate By Race/Ethnicity36 Figure 21: Protective Factors In Which People Participate By Income

Executive SummaryIntroduction1 Thesurvey was conducted by telephone between September 2, 2004 and October 10, 2004, by NOP World. The surveywas conducted among a nationally representative sample of 1,509 people, age 45 and older. Oversamples, whencombined with those from the general sample, included at least 300 African American, 300 Hispanic, 300 Asian, and200 American Indian interviews. Hispanics were surveyed in Spanish. However, all other races, including Asians (whomay not have been native English speakers) were interviewed in English. For that reason, Asian responses may notconsistently and/or accurately reflect non-English speaking Asians. Similarly, American Indians were interviewed fromseveral contiguous states and Alaska. We did not call American Indian reservations. For that reason, findings may notaccurately reflect American Indians who reside on reservations.3Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45 Community 2004 Multicultural SurveyAmerican consumers are working longerand living longer while spending more andstruggling to save more. Without properbalance, this recipe may lead to disaster formature Americans. Among the multiculturalcommunity of African Americans, Hispanics,Asians, and American Indians, this isespecially true because the ebb and flow offinancial currency often disproportionatelyaffects them in a negative way.Today, creating, sustaining, and protectingone’s financial security is challenging butcritical. With the steady demand for consumers’ dollars, and a prevalent “spend now,pay later” mentality that encourages creditcard use, obtaining lifetime financial securityis a deliberate and often painstaking process.Maintaining financial stability inretirement has always been important.Now, more than ever, it requires diligencefrom Americans age 45 . They have seenthreats to historically sound financialsystems. Social Security, which was neverintended to be the sole source of retirementincome, will remain a stable income sourcefor future generations despite long-termfinancial challenges. Most of tomorrow’sworkers are not likely to receive a definedbenefit pension from their employers—andmost who do receive a pension will receivea 401(k) instead of a defined benefit.The 2004 Multicultural Survey wasdesigned to address a broad range offinancial behaviors within the 45 community. It explores spending, saving, andborrowing patterns of the 45 consumer,with an emphasis on past and futurefinancial activities including purchasinghomes, saving for retirement, and payingmedical bills.This survey is unique because it includesoversamples of African Americans,Hispanics, Asians, and for the first time,American Indians.1 Various multiculturalorganizations including African American,Hispanic, Asian, and American Indianorganizations were consulted during thedevelopment of this survey to make surethat the questions and perspectives wererelevant and culturally sensitive.Because we were interested in financialbehaviors in multicultural communities thatmay have been omitted from prior surveys,we also asked about nontraditional financialactivities. For example, we found that peoplewithout bank accounts (the “unbanked”)compared with those with bank accountsmore often use alternative/nontraditionalmeans for banking such as check cashingoutlets and payday lenders.Several survey findings are particularlynoteworthy. First, all consumers age 45 areworried about how they will cover basic

4Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45 Community 2004 Multicultural Surveyfinancial living expenses. In general,younger people (ages 45 to 64) seem to bemore concerned about covering theseexpenses than people age 65 . MatureAmericans 45 are somewhat or veryconcerned about all 10 items presentedin the survey, including how they willobtain money to pay their mortgage orrent, and how they will provide moneyto care for grandchildren. We found that half (50%) of olderAmericans 45 are somewhat or veryconcerned about meeting their monthlycosts such as electricity, utilities, heatingand cooling, telephone, grocery bills,and food. Almost two-thirds (64%) aresomewhat or very concerned about healthcare expenses including prescription drugcosts. However, in general, a significantlygreater proportion of African Americans,Hispanics, Asians, and American Indiansthan the general public or non-Hispanicwhites express heightened concern aboutthese expenses.Secondly, we found that despite seriousfinancial concerns among 45 consumers,a significant number of people say they willspend money on leisure activities in the nexttwo years. When presented with a list of activities they anticipate in the next two years,consumers 45 were more likely to say theywill be going on vacation (63%) thanbuilding an emergency fund (41%). Otherfindings include: African Americans, Hispanics, Asians,and American Indians plan to focus onhome-centered spending. They givepriority attention to getting a mortgage,paying off a mortgage, and remodelingtheir homes. African Americans, regardless ofincome, are more likely than areconsumers in general to say they willcare for grandchildren or aging parentsin the next two years. In addition, a greater proportion ofHispanics, regardless of income, plan tostart businesses in the next two yearscompared with the general population. Younger consumers (age 45 to 54) aremore likely than consumers age 55 to64 and 65 to be saving to pay off debt,to pay for school tuition, and topurchase a business.The 2004 Retirement Confidence Survey(consumers 18 ) found 68% of all workershave already saved for retirement and 58%are currently saving for retirement.2 The2004 Multicultural Study revealed thatmore than three quarters of respondentsin the 45 age group (76%) are currentlysaving for retirement.Another important finding relates toprotecting one’s financial and personalinformation. According to Beales (2002) ofthe Federal Trade Commission, older adultsare considered to be more vulnerable, andtherefore more at risk for opportunities offraud. Low rates of identity theft amongolder adults could be attributed to the factthat they are not as likely to report whenthey have been victimized.32 EmployeeBenefit Research Institute, American Savings Education Council, and Mathew Greenwald & Associates, Inc.,2004 Retirement Confidence Survey.3 Beales,H. (2002). Prepared statement of the Federal Trade Commission on Identity Theft: The Impact on Seniors Beforethe Senate Special Committee on Aging. www.ftc.gov/os/2002/07/020718identitytheft.htm

An overwhelming majority (96%) of thegeneral public age 45 reported havingtaken at least one of the steps tosafeguard their personal and financialinformation.These and other findings are highlightedin the summary of findings.Summary of FindingsMajor ConcernsRespondents were asked how concernedthey are about having enough money topay for several basic expenses. An astounding 50 percent of all midlifeand older Americans go to sleep everynight concerned about having enoughmoney to pay for basic monthly costs suchas telephone, groceries, and utilities. Whilethe proportion of Asians (50%) who expressdeep concern about monthly costs mirrorsthe 45 general public, far more people inthe African American (68%), Hispanic(60%), and American Indian (60%) communities are concerned about costs includingutility, telephone, and grocery bills. In general, paying for health careexpenses tops the list of concerns, withalmost two-thirds (64%) of the 45 public having strong concerns aboutaffording health care expenses,including the cost of prescription drugs. Furthermore, having cash for emergencyexpenses (58%) and long-term care,such as having someone care for themas they grow older, resonates with themajority (51%) of 45 respondents.Overall, African Americans, women,those with a high school diploma or less,and non-homeowners are most concernedabout having money to cover expenses.More specifically: Women are highly concerned aboutpaying for monthly utility bills, majorrepairs, consumer or credit card debt,someone to care for them as they age,5Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45 Community 2004 Multicultural SurveyWe asked consumers about seven stepsthat may protect financial and personalinformation. The steps are: regularly refusingto give out personal information; regularlyreviewing financial documents; shreddingunwanted financial information; carryingfewer credit and identification cards;ordering and reviewing a copy of one’scredit report; signing up for the nationaldo-not-call list; and telling credit bureausthey do not want to receive unsolicitedfinancial offers by mail.

funeral and burial expenses, and healthcare costs including prescription drugs.6Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45 Community 2004 Multicultural Survey Renters worry about having enoughmoney to pay their rent, paying theirconsumer debt or credit cards, andgenerating enough money for unforeseenincidents and emergencies. Low-income consumers are worriedabout paying homeowners insuranceand paying off their consumer debt.In addition, those with less than acollege education are worried aboutburial expenses and prescriptiondrug costs.FIGURE A: MAJOR CONCERNS BY RACE/ETHNICITYQ: Please tell me how concerned you are about having enough money to pay for.? Are you concerned,somewhat concerned, not too concerned, or not at all concerned?Base: Total General Public n 1509, Samples: Non-Hispanic White n 1299, African American n 300, Hispanic n 300,Asian n 300, American Indian n 200Total General PublicAfrican AmericanAsianNon-Hispanic WhiteHispanicAmerican IndianHealth care expenses including prescription drug costs64%73%67%63%62%56%An emergency expense58%Total General PublicAfrican AmericanHispanicAmerican IndianAsianNon-Hispanic WhiteTotal General PublicAfrican AmericanHispanicAsianNon-Hispanic WhiteAmerican Indian68%64%62%61%55%Someone to take care of you as you age51%61%53%52%50%45%Total General PublicAfrican AmericanHispanicAmerican IndianAsianNon-Hispanic WhiteYour monthly costs such as electricity, utilities, heatingand cooling, telephone, grocery bills, and food50%68%61%61%50%48%Total General PublicAfrican AmericanAmerican IndianAsianHispanicNon-Hispanic WhiteMajor repairs such as replacing the roof or car repairs45%60%56%52%50%43%

Saving BehaviorRespondents were provided with a list of14 financial activities or major purchases,and asked which ones they would engagein over the next two years. Despite theserious financial concerns expressed byrespondents age 45 , 63% are going onvacation, 61% will pay medical bills, and57% will save for retirement. Almost six in 10 (59%) Hispanics say theyare not saving any money, as do morethan four in 10 American Indians (44%),and almost four in 10 African Americans(39%). Fewer than one-third of Asians(31%) report not saving any money. African Americans are more likely thanthe general population to participate in10 of the 14 activities over the next twoyears. They are more likely to pay offcredit card debt or loans (52%), buildan emergency fund (51%), take care ofgrandchildren or aging family members(46%), and pay for a wedding (13%). African American, Hispanic, Asian, andAmerican Indian consumers will focuson spending money on home-centeredactivities in the next two years. All thesegroups give priority attention to gettinga mortgage, paying off a mortgage, andremodeling their home. African Americans, regardless of income,are more likely than any other subgroup,including the general population to saythat they will care for their grandchildrenor aging parents in the next two years(46% vs. 37% in the general population). More men than women report saving.People with higher incomes are morelikely to report saving than those withlower incomes. Those with some collegeeducation or greater are more likely tohave savings than those with a highschool diploma or less.Banking on Quality,Convenience, and SafetyPeople choose savings and checkingvenues for similar reasons. However, morepeople assign a higher level of importanceto choosing where to cash a check than tochoosing where to save. Far more surveyrespondents hold checking than savingsaccounts, which may account for thedifference in assigned importance. More than four in 10 (42%) Hispanics,one-quarter of African Americans (27%),and one-fifth of American Indians (22%)do not have checking accounts. Fewerthan one in 10 Asians (8%) and nonHispanic whites (6%) say they have nochecking account. Top reasons for choosing a savingsaccount location include safety (62%),convenience (61%), and quality of service(58%). The ranking of factors for checkingaccounts is similar, but percentages aremuch higher. Almost nine in 10 rated7Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45 Community 2004 Multicultural SurveySpending Behavior

quality of service (91%), convenience(87%), and safety (85%) as importantwhen choosing a place to cash a check.8Perspectives Past, Present, and Future: Traditional and Alternative Financial Practices of the 45 Community 2004 Multicultural Survey When choosing a place to save, Americansage 65 , compared with those ages 45 to54, are more likely to choose based onreputation, banking

Lily Liu,AARP Knowledge Management Marta Arbelaez,AARP Diversity Aiyshen Padilla,AARP Diversity Ron LeGrand,AARP Diversity Darlene Perry,AARP Diversity Nileeni Meegama,AARP Member Value Jeanne Anthony,AARP Member Value Jerry Florence,AARP AED Membership/Director, AARP Foundation Jennie Chin

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