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Does Money Unite the American Middle Class?

With contributions from Arjun Chawla, Danielle Gelber and Rachel Smooke.

Nearly half of Americans today are defined as middle class – and they’re garnering a lot of attention as the race to the White House draws closer to an end. The media has characterized them as being left behind, anxious, and pessimistic. Their anger has fueled the rise of Donald Trump as a presidential candidate; their staunch desire for change in the status quo, distrust of the political establishment, and nostalgia for “the good old days” has become the lightning rod for Trump’s “Make America Great Again” mantra.

There’s plenty of optimism, too. Many in the nation’s middle class believe the notion of returning to a greater time just seems silly. Sure, they say, our country has its fair share of problems – threats to our liberty, our future, and our financial stability among them. But despite our shortcomings we are, and have always been, a great nation.

These polarizing opinions playing out on the political stage – and in the media – suggest a fracturing of the middle class. But the middle class was fractured a long time ago. Their hopes, desires, and opinions can’t be grouped into one large pile – today, the size of half of America – all based on their “middle-income” level.

But there may be one common thread: money. Not in how much they earn, but how the American middle class views money, their habits around spending and saving, even the foundations of their financial IQ. Understanding the common threads that connect this diverse group is an opportunity for change, not just in how politicians approach them, but in how the financial services industry connects and works with them.

We recently asked 100 middle class Americans from all over the country to share their money stories – specifically, who in their lives helped shape their views on money, how they make decisions on spending it, and where they feel most torn. We stripped away the typical criteria of income levels, investable assets, and credit scores. What we found were real people, grounded by early money lessons that influence how they think about their finances.

Here’s what we learned.

It’s All in the Family

Regardless of ethnicity or income level, almost all the stories people shared with us involved the influence of their families in shaping their views on money. Parents in particular were key influencers, and, for some women, grandmothers also played a role.

Interestingly, money lessons came more often from mom or dad, not mom and dad together. It seems that early on in life children formed a view of what kind of “money person” each parent was. In turn, these views shaped how they handle money and the tensions around spending or saving it.

Women in particular shared stories around the influence of grandparents and how family money habits get passed down from grandmother to mother to child – in small ways, such as couponing, and in bigger ways, such as keeping secrets and saving for the long term.

While money habits carry down from generation to generation, they can change based on different circumstances or contexts. For women, it seems that marriage can change not only their circle of influence but also their money views and habits. Their partner or husband can take the role as the key influencer as money shifts from “mine and yours” to a common unit of “ours.” This change however brings tension and conflict, especially if the early family lesson passed on involved keeping secrets.

Americans Values: Cars and Confidence

When we asked what people were spending money on, cars and beauty products received a high percentage of mentions. These choices reflect the value American society has traditionally placed on freedom, mobility, and appearance.

Cars represent freedom and independence. They’re part of the fabric of everyday life – a means of getting to work, visiting with friends and family, running errands. Cars are often entwined in life’s milestones (first car, first child seat, first family vehicle), evoking memories of time and place and therefore promoting emotional attachment. And so, spending money on a car can feel empowering in a way that, say, saving for retirement may not.

Appearance is also an important piece of the equation – especially for middle class women. For them, this is more than mascara or lipstick. It’s about skin care, hair care, and what it can do to boost confidence. It’s deemed a necessary expenditure, part of the regular budget, and in many cases, part of the expectation around their jobs. Yet it is also a category they regularly splurge on.

Changing the Money Conversation

While a lot of the conversation today within the financial services industry is around saving for retirement or managing long term debt such as student loans, money is often about every day choices – some small, some large. It’s perceived more in terms of what it can do in the moment versus what it can do in the future. In this context, the conversation about savings shifts to become about “good buys” or value rather than how much money to put aside.

So what does this mean for both the politician and the financial services executive? First and foremost, it means it’s time to have a different kind of money conversation – one that meets the middle class where they are versus where they should be, how they think versus what they should know, and one that fits into the context of their everyday lives rather than the far off future.

The financial services sector in particular has an opportunity to sharpen the focus on the here and now. For example, armed with insights about the desire to splurge, banks could suggest the use of bank account features that label and allocate portions of money for that. Beyond that, they can shape the idea of saving to be more tangible – one that can be done to meet specific short term goals or events e.g. vacation planning, holiday gift giving, etc.  And if the family unit is indeed the source of early money lessons and values they can help shape this generational conversation by speaking directly to the perceived role of parent, grandparent even sibling – the good, the bad and the ugly – in a way that helps an individual shape their own financial identity in the context of their daily lives.

By more effectively supporting the middle class in their quest to meet every day goals and make everyday decisions they can gain valuable insights that can be leveraged to give people the confidence they need to step into longer term goals.  More importantly, this kind of help can create the necessary relevance and empathy needed to build trust – an important goal for the financial services institution aspiring to be a “trusted advisor.”

Though the world may be changing for the middle class, certain truths persist. There is clear commonality in people’s approach to money – how they spend it, save it, and everything in between. This common ground represents an opportunity for the financial services industry to spark a change in the conversation – and with the presidential election, that time is now.

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