Only 28 percent of Americans are “financially healthy,” according to a new survey from the Center for Financial Services Innovation (CFSI) funded in part by AARP.
More than half (55 percent) of those surveyed are just “financially coping” — described as struggling with some aspect of their finances — while 17 percent are “financially vulnerable,” meaning they are struggling with all or nearly all aspects of financial life, according to the first U.S. Financial Health Pulse. The survey partners expect it to be an annual benchmark of how Americans are managing their financial lives.
“Stock market trends, the unemployment rate and other macroeconomic measures don’t always reflect people’s everyday financial lives,” said Catherine Harvey, senior policy advisor in the AARP Public Policy Institute. “The U.S. Financial Health Pulse provides a more holistic, more human look at how households are faring financially.”
To assess where respondents fit, the report scores them against eight indicators: bill payment, spending, short-term savings, debt load, insurance, saving for retirement, planning and credit.
Among the findings:
- 47 percent of Americans say their spending equaled or exceeded their income in the past 12 months.
- More than a third (36 percent) are unable to pay all of their bills on time.
- 45 percent of Americans do not have enough savings to cover three months of living expenses.
- 37 percent are not confident they are taking the necessary steps to meet their long-term financial goals.
- 1 in 3 Americans (30 percent) say they have more debt than is manageable.
- And 4 in 10 do not agree with the statement “My household plans ahead financially.”
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According to the report, in 1973, middle-income Americans could “live comfortably,” put their children through college and invest in the future. Today, the high cost of basic living expenses puts that lifestyle out of reach for millions of Americans.
The report also notes that:
- The median wealth of U.S. households has not yet recovered to pre-recession levels.
- Loan defaults are inching up and credit card debt is at an all-time high.
- Total household debt is higher than it was before the financial crisis.
- Boomers are nearing retirement with insufficient savings.
- And Americans of all ages are struggling under mounting student loan debt.
“The finding that just 28 percent of us are financially healthy compels us to look more closely at the factors behind the figures and what we can do to promote financial health,” Harvey said. “For instance, the report finds that having an emergency savings account significantly boosts your financial health score. AARP is a big proponent of employer-based emergency savings accounts as a way to help people build savings through their paychecks.”
The report cites three trends that contribute to Americans’ lack of financial resilience:
- Those who struggled financially while growing up are less likely to be “financially healthy” today than those who did not struggle financially. Studies show declining relative economic mobility in America and an increasing concentration of wealth among better educated and higher income households.
- The high costs of housing, health care and food are making it difficult for Americans to lead financially healthy lives.
- Americans who experience workplace instability, including unpredictable schedules and volatile wages, are falling behind while striving for financial health.
In the coming months, AARP expects to analyze the CFSI data to explore the financial health of Americans over the age of 50.