Financial discipline grows 5 years after crisis

Survey: Americans change behavior

BOSTON — The frugality and investing discipline that the 2008 financial crisis imposed on Americans appear to have led to permanent changes in behavior on money matters, according to a survey by the nation’s second largest mutual fund company.

Spendthrift ways are unlikely to again become as pervasive as they were before the crisis, Fidelity Investments concluded Wednesday in releasing results of its “Five Years After” survey of nearly 1,200 investors.

Behaviors that appear to be now entrenched include saving more in 401( k) plans, paying down debt and taking greater care to invest wisely.

“These tend to be very sticky decisions, because you begin to budget and spend around a higher savings rate,” said John Sweeney, an executive vice president with Boston-based Fidelity. “People are taking control of their financial lives, and control breeds confidence.”

Survey participants were interviewed over two weeks in February, nearly five years after the government- brokered rescue sale of Wall Street firm Bear Stearns to JPMorgan Chase. That event, in March 2008, is regarded as a tipping point for the tumultuous upheavals that followed, including the September 2008 collapse of Lehman Brothers, which the government allowed to fail.

Housing prices plunged, unemployment spiked and stocks tumbled more than 50 percent from the mar- ket’s October 2007 high to its March 2009 low. It wasn’t until last month that the Dow Jones industrial average returned to its pre-crisis high.

Key survey findings include:

Fifty-six percent reported their financial outlooks changed from feeling scared or confused at the beginning of the crisis to confident or prepared five years later.

Survey participants estimated their household had lost 34 percent of the value of their total assets, on average, at the low point of the crisis. Thirtyfive percent experienced what they considered to be a large drop in income, and 17 percent said at least one head of their household lost a job.

Forty- two percent increased the amounts of regular contributions to workplace savings plans such as 401(k)s, or to individual retirement accounts or health-savings accounts.

Fifty-five percent said they feel better prepared for retirement than they were before the crisis. However, among the group of survey participants who reported they continue to feel scared, just 34 percent said they’re better prepared for retirement.

Forty-nine percent have decreased their amount of personal debt, with 72 percent having less debt now than they did pre- crisis. About 31 percent of those who indicated they’re still scared reported that they have reduced debt.

Forty- two percent have increased the size of the emergency fund they’ve established to meet large unexpected expenses. Among those self-reporting as scared, 24 percent have a bigger emergency fund than they had pre-crisis.

Seventy-eight percent of those saying they’re prepared and confident said the financial actions they’ve taken are permanent changes to their behavior. Fifty-nine percent of the scared group said they’ve made permanent changes.

Sweeney said the survey findings and Fidelity’s own data on customers’ actions during the financial crisis suggest investors have become more engaged about managing their portfolios. People also have become smarter about managing the risks of potential investment losses and avoiding unsustainable debt levels.

“We can’t control the markets, but we can control how much we save and spend,” he said. “It will help them better weather the next period of market volatility.”

One of the most pronounced changes in investor behavior since the crisis has been growth of savings invested in bonds and bond mutual funds. Bond funds have attracted more than $1 trillion in net deposits since 2008, while money has been pulled out of stock funds for the past six years in a row. Bonds typically generate smaller long-term returns than stocks, but with less chance of short-term losses.