As Americans dig into frugality, consumer companies feel the pinch

Some U.S. consumers are learning how to stretch
their staples to save money. (Adobe Stock photo)

As creeping grocery inflation continues, U.S. consumers are clamping down on spending by resurrecting saving and stretching tactics, which is translating into slower sales across the sector. "People are experimenting with frugality, and it is affecting sales at consumer companies," reports Natasha Khan of The Wall Street Journal. The more families pinch pennies, the less they spend.

Devising ways to save on staples has led some consumers to begin diluting products, such as dishwashing liquid or cleaners, to get more while using less. Some have decided you don't need a toothbrush full of toothpaste to prevent cavities -- a single dollop at the end of the brush can do the job.

For many consumers, scrapping every bit here and using a little bit less there can save precious dollars, while consumer companies see sales slip. Khan explains, "Procter & Gamble reported volume declined 2% in the latest quarter in its home and fabric-care division, which includes brands like Tide detergent, Dawn dish liquid and Swiffer dusters."

Even as brand-name purchases have dipped, generic product sales haven't increased, suggesting "consumers are using up their inventory and making their existing stock last longer, rather than trading down," Khan adds.

Many consumer companies hope Americans will tire of scrimping and return to their less frugal habits. Andre Schulten, P&G’s chief financial officer, told analysts and investors, "I’m convinced this is temporary."

Making money off of money can be done at many banks, but they don't have to disclose better deals

Banks don't owe consumers their best
deals. (Adobe Stock photo)

Americans who choose banks with higher savings interest rates can make more money with little work; however, some U.S. banks hope consumers are too confused or hassled to bother making a switch.

"For the last few years, anyone keeping $10,000 in a high-yield savings account has earned close to 4% annual interest, or about $400 a year," reports Ben Blatt of The New York Times. "The nation’s three largest banks — Bank of America, Chase and Wells Fargo — offer 0.01% on their standard savings accounts. That works out to $1 in interest a year for a $10,000 deposit."

Sometimes banks offer additional perks to make up for their abysmal rates, but most believe "their customers won’t hunt for better deals out of inertia," Blatt explains. "Banks know their customers are generally not attentive to account details. A study commissioned by Capital One found that many people check their savings account less than once a month, and about half don’t know what interest they are earning."

While it may sound unethical, banks "have no fiduciary duty in many cases and can profit from customers’ confusion," Blatt reports. "The Consumer Financial Protection Bureau said one bank, Capital One, went too far by intentionally creating confusion so that customers wouldn’t know to switch to a higher-paying account at the same bank."

While sowing confusion may be wrong, part of a bank's purpose is to make money. Scott Pearson, a lawyer who represents banks in regulatory matters, told Blatt, “I don’t know why anyone would think that it’s the bank’s job to tell you that you can get a better deal somewhere else or that they’ll give you a better deal. That is just kind of a shocking and unprecedented theory in my view.”

Three ways the new administration could help rural America meet its challenges

Helping younger farmers helps local land stay
locally owned. (Abobe Stock photo)

Seeking a voice and change small-town America needs, many rural voters rallied for President Donald Trump to return to the White House. Now that he's back in the Oval Office, there are three ways his administration could work with Congress to help rural America face its challenges, write Randolph Hubach and Cody Mullen for The Conversation.

Health care is a good place to start.
Rural Americans are more likely to receive Medicaid or Medicare health care coverage and more vulnerable to negative impacts from policy or funding changes. "Funding from those federal programs affects rural hospitals, and rural hospitals are struggling," Hubach and Mullen explain. "Nearly half of rural hospitals operate in the red today, and over 170 rural hospitals have closed since 2010."

They recommend government funding continue for the Low-volume Hospital Adjustment Act and the rural emergency hospital model because both programs address rural health care providers' financial needs. Additional support and expansion of rural telehealth services is also needed.

Help small towns address affordable housing.
Like much of the country, rural communities lack affordable housing. To help small towns create housing solutions, the new administration should support the "bipartisan Neighborhood Homes Investment Act, which calls for creating a new federal tax credit to spur the development and renovation of family housing in distressed urban, suburban and rural neighborhoods," Hubach and Mullen add. "The Section 502 Direct Loan Program through the Department of Agriculture could be expanded with additional funding to enable more people to receive subsidized mortgages."

Keep local lands locally owned.
Rural businesses and landowners tend to care about the communities they call home. Congress could support rural land ownership through the "proposed Farm Transitions Act [that] would establish a commission on farm transitions to study issues that affect locally owned farms and provide recommendations to help transition agricultural operations to the next generation of farmers and ranchers," Hubach and Mullen add.

The Trump administration also could continue assistance for young farmers. "About 30% of farmers have been in business for less than 10 years, and many of them rent the land they farm," they write. "Programs such as USDA’s farm loan programs and the Beginning Farmer and Rancher Development Program help support local land purchases and could be improved to identify and eliminate barriers that communities face."

Eye-popping college costs vs. what students actually pay; research report looks at higher education comparisons

Brookings graph, from Department of Education data

Younger generations may be bypassing college due to its eye-popping costs, but research shows that few students pay the "listed" price. "Public discussions regarding rising college costs typically focus on the listed cost of attendance (COA), or 'sticker price.' High and rising college sticker prices are the subject of considerable attention, reports Phillip Levine for Brookings. But the sticker price isn't what families pay. "The average amount students actually pay (the 'net price') has recently stabilized and even fallen in the last few years."

Levine's research concluded that "sticker price is an increasingly poor indicator of college prices for all students, regardless of family income. . . . The growing use of merit-based aid at both public and private institutions accounts for this. At public institutions, the vast majority (79%) of those higher-income students paid the full sticker price in 1995-1996. That share dropped to 47% in 2019-2020."

While the net price for a student attending a public institution has risen, "This upward drift in net prices at public 4-year institutions indicates that they are becoming increasingly more expensive over time for students at all levels of the income distribution. The increase for higher-income families was larger in dollar terms but roughly similar in percentage terms," Levine writes. "That maximum net price is often lower than the sticker price because of the extensive use of merit awards." Net price at private institutions is "consistently higher than at public institutions."

While net prices have increased for all students across all income levels, those increases are smaller than the stated hikes in sticker prices. Levine reports, "Adjusted for inflation, net prices paid by students today at public institutions across the income distribution are similar to those they would have paid at private institutions in the mid-1990s."

Levine adds, "This analysis yields several implications for policy discussions regarding college pricing. First, the nearly universal focus on the sticker price in public discourse is detrimental to our understanding of college costs. It is the easiest measure to track, but it is a misleading statistic that a small and declining number of students pay. Even many higher-income families do not pay the full sticker price."

Multigenerational households are on the rise; finances and medical care are the top reasons why

Map by Alice Feng, Axios, from U.S. Census data

More people are choosing to live in multigenerational households to cope with financial stress and medical care, reports Brianna Crane of Axios. Multigenerational housing -- defined as three or more generations under one roof -- is concentrated in certain areas but is gaining in popularity. South Dakota is home to "half of the top 10 counties with the highest share of multigenerational households. . . .North Dakota and Nebraska have some of the lowest shares."

In 2020, there were "6 million multigenerational households in the United States in 2020, up from 5.1 million in 2010, according to census data," Crane adds. While the two biggest reasons people cited for cohabitating families were financial concerns and caregiving needs, there are also mental and physical benefits to living closer to family or friends.

Chart by Baidi Wang, Axios, from Pew Research Center data

No matter the reason, multigenerational homes are predicted to keep increasing. The number of such households has "quadrupled from 1971 to 2021," reports Nathan Bomey of Axios. "Population growth among people of color is a big reason for the increase as they are more likely than white Americans to live with extended family," according to a Pew Research Center study. D’Vera Cohn, one of the report's authors, told Bomey, "This is not a phenomenon that has peaked."