Report: Consumers Spending Savings From Lower Pump Prices On Necessities

Four in 10 Americans are spending savings from lower gasoline prices on necessities such as groceries or rent, according to Bankrate.com’s monthly Financial Security index released Monday, echoing recent state and national reports that consumers are seeing more discretionary income because of lower pump costs.

“In a testament to tight household budgets, more Americans spent the savings from lower gasoline prices on necessities than anything else,” said Greg McBride, CFA, Bankrate.com’s chief financial analyst. “The percentage of Americans earmarking this money for everyday necessities outpaced those using it for discretionary purchases by nearly 3-to-1.”

Bankrate.com’s survey is based on a telephone survey conducted by Princeton Survey Research Associates International. The survey was taken from April 30 to May 3 with 1,000 adults living in the continental U.S. It has a margin of error of plus or minus 3.6 percentage points. People were asked to assess the state of their personal finances compared with 12 months ago.

The Bankrate.com report follows last week’s Arvest Consumer Sentiment Survey that said Arkansas are feeling more optimistic about their economic situation as lower fuel prices and rising incomes are providing families with more money to spend.

At the same time, the average U.S. household is expected to spend about $700 less on gasoline in 2015 compared with 2014 as annual motor fuel expenditures are on track to fall to their lowest level in 11 years, according to the U.S. Energy Information Administration.

In the Bankrate.com survey, less than 1-in-4 (23%) Americans saved or invested the extra savings (19% saved and 4% invested). Millennials were more likely to have saved (26%) or invested (6%) the money than any other age group.

Just 1-in-7 (14%) spent it on discretionary items, such as dining out or a vacation. Millennials (17%) were most likely to have spent on non-essential items while senior citizens were the least likely (7%).

“When just 14 percent of Americans ramp up spending as a result of gasoline savings, you see why the economy is growing at such an anemic pace,” said McBride.

Americans gave high marks to their financial security in May, with the Financial Security Index rocketing back to the second highest level on record, 104.6. This trails only the 104.8 clocked in February 2015.

Improvement over the past year has been noted in four of the five components, with the only laggard continuing to be savings. Twenty-seven percent of Americans feel less comfortable with their savings while 22% feel more comfortable. Compared to one month ago, responses improved on all five components in May.

Worries about job security are tied for the lowest percentage on record – only 11% of Americans feel less secure in their jobs than one year ago.

Americans reporting higher net worth than one year ago outnumber those reporting lower net worth by more than 2-to-1 (29% to 14%).

Just 16% of Americans say their overall financial situation has deteriorated over the past year, a level that is just half of what was seen when the poll commenced in December 2010. This is also down drastically from the peak of 35% recorded in August 2011.

The survey can be seen in its entirety here.