When it comes to financial health most Americans are not doing well. The annual U.S. Financial Health Pulse was released today and it shows that only 29% of people are financially healthy. Meaning these people are spending, saving, borrowing, and planning in a way that will allow them to be resilient and pursue opportunities over time.
The U.S. Financial Health Pulse, in its second year, is led by the Financial Health Network (formerly CFSI) in partnership with Flourish, MetLife Foundation, and AARP. The Pulse report scores survey respondents against eight indicators of financial health — spending, bill payment, short-term and long-term savings, debt load, credit score, insurance coverage, and planning — to assess whether they are “financially healthy,” “financially coping,” or “financially vulnerable”. The survey was conducted between April and June this year.
Here are some key findings from the report:
- 29% of Americans are financially healthy, up just 1% from 2018.
- People are saving less:
- 12.0% of people say they have less than one week of living expenses saved in 2019, up 1.4% from 2018.
- 55% of people aged 26-49 say they do not have enough savings to cover three months of living expenses in 2019, an increase of 4.8%.
- People are paying their bills:
- 66.1% of Americans say they can pay all of their bills on time in 2019, up 2.2% from a year earlier.
- People with household incomes less than $30,000 are reporting a better ability to pay their bills on time and manage their debt, up 5.3% and 4.9% respectively.
- Women are experiencing significant shifts in stability and stress:
- 51.2% of women say they do not have enough liquid savings to cover three months of living expenses in 2019, an increase of 2.6%
- 20.1% of women say their finances cause them a high amount of stress, compared to 13.2% of men.
- Middle income people are showing signs of vulnerability:
- 19.7% of people with household incomes from $30,000 to $59,999 said they spent more than their income in the 12 months prior to the 2019 survey, up 4.1% from 2018
- People with household incomes from $60,000 to $99,999 experienced a similar increase.
The Pulse was also able to compare the same individuals year over year and found that millions of Americans experienced significant swings in their financial health from 2018 to 2019. The median FinHealth score (a score based on the eight indicators mentioned above) change was 7.5 points but one in five people saw their FinHealth Scores increase or decrease by 15 points or more.
Jennifer Tescher, the founder and CEO of the Financial Health Network had this to say about the second Pulse report:
Financial health is fluid. Measuring year-to-year change can give us perspective on what types of factors influence financial health over time, while seeing nuanced data can give us critical insight into how people are faring beyond the aggregate. Identifying areas where Americans are struggling can help stakeholders such as policymakers, employers and insurers hone in on ways to help these groups create more financial resilience.
My Take
As I have said many times the real promise of fintech is to make a positive difference in the lives of everyone. We are still a long way away from delivering on that promise. But the Financial Health Pulse is a unique window into how we, as a nation, are doing. While it is not all bad news, clearly there are segments of the population that continue to struggle.
We need to build better tools that help people manage their debt as well as build emergency savings. These are the two areas that will make the most difference. While many fintech companies are addressing these areas and are helping millions of people clearly there is much more work to be done here.
I hope that within five years we will see some real changes in these numbers, in some part the result of the work being done in fintech today.
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.