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Survey Reveals: Shift in Spending, Saving & Financial Priorities

February 21, 2002 at 8:06 AM EST

FALLS CHURCH, Va., Feb. 21 /PRNewswire/ -- With a national unemployment rate of 5.6 percent, doing more with less has become the mantra of recent times. A survey conducted by Money Wi$e, a joint financial literacy partnership of Consumer Action and Capital One, uncovered that more than half (57 percent) of surveyed adults are tightening their purse strings, willing to take a second job (66 percent), and cutting back on dining out (75 percent) and vacations (73 percent), in order to survive the realities of the post New- Economy era in 2002.

Current Economy Requires Fine Tuning Money Management Skills

The survey* gauged the population's financial behaviors during the current economic downturn and measured its ongoing reaction to recent market spirals. The majority of adults (59 percent) say they have emergency funds set aside if faced with a financial crisis like unemployment. Many claim these funds will only provide a short-term financial cushion of less than three months. In addition, while most Americans would cut back on leisure spending, 38 percent would consider cashing out CDs, stocks or bonds, and some would stop depositing into savings and retirement accounts.

"Adults are feeling pressured and are taking steps to weather financial instability as the economy continues to stagnate," said Diana Don, Director of Financial Education at Capital One. "Recognizing how difficult it is to plan for a stable financial future in uncertain times, we're offering the second in our Money Wi$e series of free resources. These new materials provide tools and tips needed to develop good money management skills. Understanding how to budget and save properly can make a major difference when trying to make ends meet."

The Money Wi$e series of simple, straightforward brochures that address financial responsibility are produced in five languages (English, Spanish, Vietnamese, Korean and Chinese) and are available to more than 7,000 community organizations nationwide. According to Consumer Action Executive Director Ken McEldowney, "The brochures are a great financial planning tool. They address ways to navigate through troubled times with tips for managing money wisely, setting financial goals and evaluating one's financial situation."

Key Survey Findings:

Survey Finding 1: Forty-five percent of Americans have not specifically set aside emergency funds and feel they could get by for only four weeks without a job.

Money Wi$e Tip: Create a financial plan for spending and saving with the goal of establishing an emergency fund equivalent to three month's salary

  • Financial plans help consumers figure out how to wisely manage their money and control spending, which will help them be better prepared for unemployment.

Survey Finding 2: Out of the respondents who are spending more conservatively this year, 23 percent of them are cutting back on saving and depositing into retirement accounts.

Money Wi$e Tip: Reduce expenses or generate additional income

  • Cutting back on saving and investing is a short-term solution and will impact financial stability in the long-term. Instead, Americans should cut back on other extraneous expenses and seek additional means of income.

Survey Finding 3: Two-thirds of Americans would seek a second job in the face of financial difficulties.

Money Wi$e Tip: Seek additional means of income

  • When second jobs are scarce, Americans can consider low- and moderate- income assistance programs to help generate supplemental income. In addition, those with an adjusted gross income of less than $10,710, or an adjusted gross income of $28,281 and one qualifying child, are eligible for an earned income tax credit**; others may consider holding a garage sale.

Money Wi$e: Materials, Training and Seminars

Educational materials will be available directly to consumers online at http://www.consumer-action.org or by sending a self-addressed, legal sized stamped envelope to: Consumer Action Money Wi$e, "Money Management," 717 Market Street, Suite 310, San Francisco, CA 94103. The first Money Wi$e brochures, "Understanding Credit," and "Money Management" are now available; future topics include "Basic Banking," and "Going from Bad Credit to Good Credit." Consumers can find information about local counseling sessions and workshops by calling Consumer Action at 415-777-9635.

Trained by Consumer Action, and equipped with materials and a training/curriculum manual, Capital One employees volunteer near the company's headquarters in Virginia to teach financial education to the public. Capital One will give associates two days off each year for volunteering their time to the Money Wi$e program.

About Capital One

Headquartered in Falls Church, Virginia, Capital One Financial Corporation (http://www.capitalone.com ) is a holding company whose principal subsidiaries, Capital One Bank and Capital One, F.S.B., offer consumer lending products. Capital One's subsidiaries collectively had 43.8 million customers and $45.3 billion in managed loans outstanding as of December 31, 2001. Capital One, a Fortune 500 company, is one of the largest providers of MasterCard and Visa credit cards in the world. Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 index.

About Consumer Action

Consumer Action (http://www.consumer-action.org ) is a non-profit, membership-based organization founded in San Francisco in 1971. Consumer Action serves consumers nationwide by advancing consumer rights, referring consumers to complaint-handling agencies and publishing multilingual educational materials. Consumer Action also advocates for consumers in the media and before lawmakers and compares prices on credit cards, bank accounts and long distance services.

  • Survey conducted of U.S. residents 18 and over conducted by International Communications Research

** Source: Internal Revenue Service -- Other ways to qualify for the

       earned tax credit include: Your earned income and modified AGI must be
       less than $32,121, if you have more than one qualifying child; your
       investment income cannot be more than $2,450; Your filing status can be
       any except married filing a separate return; you can not be a
       qualifying child of another person (If you are filing a joint return,
       neither you nor your spouse can be a qualifying child of another
       person; and your qualifying child cannot be the qualifying child of
       another person whose modified AGI is more than yours.)

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SOURCE Capital One Financial Corporation and Consumer Action

CONTACT: Diana Don of Capital One, +1-703-205-1165 or diana.don@capitalone.com; or Ken McEldowney, +1-415-777-9648, or Linda Sherry, +1-415-777-9648 or linda.sherry@consumer-action.org, both of Consumer Action/