By Thea Garon, Director, Financial Health Network
A few weeks ago, the Financial Health Network released new data from the U.S. Financial Health Pulse, a groundbreaking study designed to provide ongoing snapshots of financial health in America. Launched last year, the study draws upon consumer surveys and transactional data to assess how people are spending, saving, borrowing, and planning. In the 2019 Trends Report, we use two year’s worth of survey data to explore how financial health has changed across the nation, for specific population segments, and among the same individuals since last year.
Despite an economy that has continued to grow, we found that only 29% of people in the United States are Financially Healthy, roughly the same as last year. As fears loom that a recession is on the horizon, this finding is particularly alarming because it suggests that a majority of Americans may be unprepared to weather an economic downturn.
And yet these national figures only tell us so much. To truly understand the nature of financial health in America we need to look beyond the aggregate figures.
When we do, we find that millions of people experienced changes in their financial health over the past year.
- A quarter of Americans (24%) changed financial health tiers (Healthy, Coping, Vulnerable) over the course of a single year.
- People who experienced changes in their employment status and physical health also saw the largest year-over-year shifts in their financial health.
- Debt can dampen the positive effect of some life events, while savings can mitigate the negative impact of others.
When we disaggregate the data, we also find notable bright spots:
- People are having an easier time paying their bills and are more confident they will be able to pay off their debt within 5 years.
- Lower income individuals are more financially healthy than they were a year earlier, but they remain less financially healthy than their higher income peers.
Yet, we also see signs of increasing vulnerability since last year:
- People are setting aside less money in short-term savings and are less confident their insurance will provide sufficient coverage in an emergency.
- Middle-income earners and people in their prime working years are struggling to spend less than their income and to build a reserve of short-term savings.
- Women are less confident their insurance will provide sufficient coverage in an emergency and are less likely to say they have at least 3 months worth of living expenses saved.
- The financial health gap between whites, blacks, and Hispanics remains stark.
These findings reinforce the need for stakeholders across the financial health ecosystem to invest in solutions that can help Americans spend wisely, build savings, manage debt, and plan for the future. Since people’s financial health is fluid — it can change significantly from one year to the next — a wide array of stakeholders, including financial service providers, policymakers, employers, educators, and others can develop solutions that make a meaningful difference in people’s financial lives. Especially as fears loom that a recession may be on the horizon, this need is more acute than ever. The 2019 Trends Report suggests clear next steps that these stakeholders can take to improve the financial health of all Americans.
In the coming months, we plan to release additional cuts of the data exploring financial health trends for different groups of Americans and within various sectors (healthcare, workforce, and education). We will continue exploring the role of “place” in shaping financial health through a neighborhood-level analysis of the Pulse data set and by releasing original survey research conducted in Hawaii. And we will augment survey data with insights from financial data that study participants agree to share with us, releasing a composite assessment of financial health based on survey and transactional data by the end of 2020.
Thank You to our Funders and Partners
A study of this size and scale would not have been possible without the support of our funders — Omidyar Network, MetLife Foundation, and AARP. We would also like to thank the team from the University of Southern California Dornsife (USC) Center for Economic and Social Research for fielding the study to their online panel and for serving as academic advisors to the initiative. We are looking forward to continuing to work with Plaid to help us collect and analyze study participants’ transactional and account records. And we are grateful for the guidance of an esteemed group of individuals with a diverse set of expertise who serve on the initiative’s Advisory Council.
Interested in Getting Involved?
There are many ways your organization can get engaged with the U.S. Financial Health Pulse. We are eager to share findings from the 2019 Trends Report with you and your colleagues and discuss what these findings mean for your work. We are also looking for companies interested in sponsoring financial health deep dives on particular topics or population segments. Additionally, we are seeking general sponsorship of the initiative. If you are interested in learning more about these opportunities, please reach out to me at email@example.com.
This post is a part of a series from the authors of the U.S. Financial Health Pulse. In the coming months, we plan to discuss different cuts of the data and respond to compelling questions and feedback we receive from our audience.
The U.S. Financial Health Pulse is made possible through a founding partnership with Flourish, a venture of The Omidyar Group. Additional support is provided by MetLife Foundation, founding sponsor of the Financial Health Network’s financial health work, and AARP. The Financial Health Network is partnering with the University of Southern California Dornsife Center for Economic and Social Research (CESR) to field the study to their online panel, the Understanding America Study. The Financial Health Network is also working with engineers and data analysts at Plaid to collect and analyze transactional and account data from study participants who authorize it.
By Financial Health Network on December 11, 2019.