Home Investing Survey: Have Americans Become More Frugal?

Survey: Have Americans Become More Frugal?


Key Takeaways

90.4% of respondents claimed they have frugal spending habits. The three spending categories they reported cutting back on the most were entertainment (45.8%), dining out (44.5%), and travel (42.5%).
The top three reasons why respondents maintained frugal spending habits were because they’re saving for future investments (56.3%), they have a lack of savings (51.9%), and they need a rainy day fund (42.6%).
While 56.4% of respondents believed it was easy to stick to a budget, 35.9% found themselves fighting the urge to splurge either all the time or often.
64.3% of respondents reported feeling worried about another lockdown or economic shutdown due to new COVID-19 variants.

Does the Future Look More Frugal?

Whether out of necessity due to hardship or out of the fear of the unknown during COVID-19, many people started to tighten their belts and adopt more frugal habits over the past year. So we wanted to know: what does being frugal mean to you? Are you already imagining a life of lack and pinching pennies, or do you envision more freedoms being available to you? We recently spoke to 1,000 people in the U.S. about their perceptions of being frugal as well as their financial status and goals.

Respondents across the country shared their budgets, how easy or hard it was for them to stay on track, and how the pandemic has impacted every financial decision. If you’re curious to see how your own spending and saving behaviors stack up, keep reading.

What Does it Mean to “Be Frugal”?

Is being frugal something to be revered or embarrassed by in today’s society? Respondents rated the word “frugal” as positive, neutral, or negative, and their answers were broken down by generation and financial status.

Overall, being frugal was generally considered to be positive, but not by an overwhelming margin. While 59.3% considered being frugal a positive thing, the remaining 40 percent were not in agreement. Baby boomers and millennials were generally less likely to see being frugal as something positive.

In terms of finances, however, being frugal was a very lucrative choice. Those who identified themselves as in good financial health were eight percentage points more likely to consider frugality to be a good thing. While some financial experts argue that frugality alone cannot make you rich, practices like budgeting and living below your means do impact a person’s ability to build wealth. As respondents also demonstrated, being frugal generally correlates with a healthier financial standing.

The True Meaning of Frugality

Apart from the general connotation of frugality (which most respondents considered to be positive), we wanted to know what being frugal meant to them. We asked if they felt their general spending habits were frugal, and where they were cutting back the most.

In spite of some negative connotations associated with frugality, 90.4% of respondents reported having frugal habits. This most often meant cutting back on entertainment (45.8%), dining out (44.5%), and travel (42.5%). Especially since the pandemic, spending towards non-essentials in general took a nosedive.

We also wanted to better understand why some respondents felt so negative towards the concept of frugality: It may be, in part, because 55.3% of those with frugal habits felt that it detracted from their way of life. Perhaps even the perk of better financial standing was not enough to override the sense of “going without.”

Pandemic’s Impact on Frugality

Being frugal has been a necessity for many since March of 2020. With major financial collapses around the world and drastically declining work hours, cutbacks on spending were essential. We looked at how various spending categories have changed each month since the pandemic struck based on data from Personal Capital.

The sharpest initial spending dip was travel, which initially took up 16% of people’s monthly spending budget but dropped to just 3%. Even if the income was available, COVID travel bans often forbid travel anyway. Instead, items like groceries and general merchandise started to take up a bigger percentage of the total. These types of purchases satisfied not only immediate needs, but also served as future emergency stockpiles.

Interestingly, home improvement — which, depending on the situation, can be a necessity or a luxury — was another category that saw an immediate increase in spending. With so much additional time indoors, the potential benefits of renovations became immediately obvious. Since January 2020, home improvement spending has increased by 61.1% with respect to monthly budget allocation.

Reasons for Reining in the Spending

This part of our study looks at respondents’ top motives and benefits for conserving money, which was broken down by generation and amount saved.

The most common incentive to be frugal was saving for future investments. More than half said this was a driving force behind their frugality, and it helped respondents save an average of $5,051 annually — significantly more than any other motivation. Fear was also an impactful force, however: Those who saved because they feared for their job security ended up with $4,832 in the bank each year. Fortunately, this fear was less common than things like wanting to save for the future or having savings goals.

The most common benefit of being frugal was getting more family time (59.2%). Instead of spending on activities outside the house, perhaps families were inclined to stay home and spend quality time with one another. For example, choosing to cook instead of dining out can help save money, improve your health, and improve family dynamics.

The Challenges of a Budget

Once you’ve taken the time to figure out a budget, sticking to it is another challenge entirely.

More than one-quarter of respondents found it hard to stick to their budgets, and the struggle was somewhat universal across generations. Millennials, Gen X, and baby boomers alike were equally likely to find the experience of budgeting difficult, suggesting it’s not a skill that necessarily comes with age or changes in income.

Those who found it easy to budget were doing better financially. Nearly three-quarters of those in good financial standing said budgeting was easy, compared to just 47.5% of people in poor financial standing.

Pandemic Pushes on Savings

We asked respondents how their fears would change their savings habits, as well as whether or not they anticipated another economic shutdown.

Only 12.6% of respondents planned to increase their savings due to the uncertainty surrounding COVID variants. At the time of this writing, the delta variant is both the most contagious and the most common strain in the U.S., and evidently has the vast majority of people feeling unable to increase their savings. Most (64.3%) were also worried about another lockdown or economic shutdown on the horizon.

On a deeper level:

Consumers that found budgeting hard were nearly twice as likely to increase their savings due to the uncertainty surrounding new COVID-19 variants than consumers who found budgeting easy.
Consumers with an annual personal income over $100K were 70.4% more likely to not feel worried about another lockdown or economic shutdown than those with an annual personal income below $50K.

Forward Thinking Finances

Even in the midst of a new variant, the threat of another shutdown, and perhaps dwindling savings, the world keeps turning. The last piece of our study asked respondents whether the pandemic was causing them to reconsider their future spending plans.

The pandemic caused many people to consider retiring early. On one end of the spectrum, early retirement was often more of a forced decision than a casual consideration during COVID-19. However, many Americans have been making the decision to leave their job for their own reasons, more commonly known as the great resignation. Those who were more frugal were even more likely to want to retire early, perhaps having accrued enough savings to feel able to do so.

The Freedom of Frugality

While many respondents said they felt negatively about the concept of frugality, even admitting that being frugal was not letting them live their lives to the fullest, the data they revealed made a strong argument for being deliberate and even a little conservative around spending. Frugality does correlate with strong financial health, and even an increased ability to retire early if desired. Respondents also noted that being frugal helped them do things like spend more time with family and stockpile savings.

“Frugal” can mean something different for different people, but at the crux of it, cutting back on excess expenses and spending within your means is at the core of this concept. Oftentimes, as our bank accounts, salaries, and net worth grows, our spending habits can grow with them. This is a phenomenon called “lifestyle creep,” and it’s all too common. To avoid this, it’s important to stay on top of your finances, have a well-defined budget, and monitor your inflows and outflows.  Personal Capital offers a completely free financial dashboard to help you stay on track. Whether you’re an expert or a novice, having a user-friendly place to keep track of your finances and work towards your goals can help you stay on track. Head to Personal Capital today to get started.

Methodology and Limitations

For this study, we surveyed 1,000 consumers via Amazon Mturk about their spending habits.

60% of respondents identified as male, 39.8% identified as female, and the remaining 0.2% identified as nonbinary. The average age of respondents was 36.9 years with a standard deviation of 11.3 years. More specifically, 63.3% of the respondents were in the Millennial or Gen Z age group and the remaining 36.7% were in the Gen X age group or older.

The main limitation of this portion of the study is its reliance on self-report, which is faced with several issues, such as, but not limited to, attribution, exaggeration, recency bias, and telescoping.

Additionally, we leveraged Personal Capital’s internal data pertaining to monthly spending in order to analyze how the allocation of spending across various spending categories changed over time throughout the pandemic.

No statistical testing was performed, so the claims listed above are based on means alone. As such, this content is exploratory and is presented for informational purposes only.

Fair Use Statement

Has your perception of frugality changed upon reading this data? You’re welcome to share the findings with others, just be sure your purposes are noncommercial and that you link back to this page.

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