Why America’s Families Are Struggling Financially

The finances of Americans may not be as good as they look from the outside.

Despite optimistic metrics like a nine-year-long bullish, if volatile, stock market, higher than expected job and wage growth, and consumer confidence levels nearing record highs, millions of Americans continue to struggle, a study released last week from financial consultancy nonprofit the Center for Financial Services Innovation (CFSI) found.

Only 28% of Americans are considered “financially healthy,” according to a CFSI survey of more than 5,000 Americans. “Financial health enables family stability, education, and upward mobility, not just for individuals today but across future generations,” the CFSI says. “Many are dealing with an unhealthy amount of debt, irregular income, and sporadic savings habits.”

Meanwhile, 17% of Americans are “financially vulnerable,” meaning they struggle with nearly all financial aspects of their lives, and 55% are “financially coping,” meaning they struggle with some but not all aspects of their financial lives. The recent volatility in the Dow Jones Industrial DJIA, +0.17%  and S&P 500 SPX, -0.02%  has not helped Americans feel secure, experts say.

These findings are based on the CFSI Financial Health Score, a framework designed by CFSI to measure financial health more holistically by examining spending, saving, credit, and other indicators. Some 44% of respondents said their expenses exceeded their income in the past year and they used credit to make ends meet. Another 42% said they have no retirement savings at all.

They come on the heels of a previous study from personal-finance site Bankrate.com that found only 29% of Americans had 6 months or more of emergency savings and a nearly equal percentage said they had none. Indeed, most Americans would not be able to pay for an emergency expense of $1,000, a separate 2015 study showed.

The median American household currently holds just $11,700 in savings, according to a recent analysis of Federal Reserve and Federal Deposit Insurance Corp. data by personal-finance site Magnify Money. The top 1% of households in the U.S. by income have a median savings of $1.1 million across a variety of saving accounts. The bottom 20% by income have no savings accounts and the second lowest 20% income earners have just $26,450 saved.

What should people do to become more financially fit?

“We need to look beyond the headlines to metrics that will help us better understand the true state of Americans’ financial lives,” the study said.

The CFSI survey shows the broad statistics on the economy, a bull market, and unemployment rates often fail to capture the plight of Americans as individuals, said Mark Hamrick, senior economic analyst Bankrate.com. “The news surrounding the markets and the economy is critically important, but it doesn’t speak to the status of everyone,” he said.

Hamrick advised making two things a priority. “All of this is a call to action,” he said. “We need to make savings, both for retirement and for emergencies a higher priority, so that they aren’t the source of financial regret later in life.”

The study from CFSI pointed to broader cycles of financial struggle. It found Americans who struggled financially growing up were less likely to be financially healthy in the future. The high cost of living in the U.S. is also challenging Americans’ ability to lead financially healthy lives. The ongoing financial stress is having negative impacts on mental and physical health, CFSI researchers said.

Meanwhile, the majority of Americans in a recent survey said their finances have not improved since the 2016 elections. “Given the market growth, consumers would expect to be earning more money, but it’s not really happening,” said Divya Sangam, spokeswoman at personal-finance site ValuePenguin.

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7 comments

  1. It is all about saving for a rainy day and they sure as hell come faster than you think.
    Taking out credit costs a hell of a lot in interest. It can be as high as the level I pay in income tax.
    People are living in a must have society. A must have it now !!!
    They don’t heed the story of Joseph and the technicolour dreamcoat.
    Seven years of good harvest and seven years of famine.
    The number of people I know (including myself at one stage of my life) who live up to their income is very high. As we know nothing in life is as sure as death and taxes. When the bad times come they have nothing to fall back on.

  2. Too many weather disasters since 2016 has had a huge economic affect on the working class both good & bad. It created jobs, it created devastation, it caused savings destruction BUT it is never mentioned as a cause of middle class strife.

  3. People are still dealing with the damage that the liberals have brought down upon us from high taxes, failed, programs, and just outright graft and corruption

  4. People today ( and yesterday ) are making too many bad choices in their spending habits. The money is there, they just live for today and don’t plan for tomorrow. I worked for a company for 30 years and that situation has not changed. Some of us banked a fair portion of our money and the rest spent what ever they made. Spendy lunches in restaurants daily and expensive clothes and cars. Standard comment was “I’ll worry about retirement in a few years. When I get closer, you know”.

  5. Many years ago there was something called, “Future Shock,” being talked about a lot. Now, it’s happening. Many families are struggling to keep up with rapid changes that require spending money earned to keep up with all the changes constantly occurring. Which, has the effect of leaving less, and less, for savings. People in this category have a problem solving issues connected with them making budgeting and planning ahead decisions. The solution is illusive because it requires families (struggling financially) to change spending habits, or, their impulse buying habits. It’s a personal decision that no one can control but the individual who’s the head of household and in control of what particular things income is used for and how much of it.

  6. This is not the place to write an essay on the differences between people but have you ever stopped to consider what you are describing is normal. Take a cross section of society at any time in the past and you will observe the same distribution, for the most part. What is “normal” leads social busy-bodies to ululate for “”Equality” . We are all created as equal as our individual fingerprints.

  7. Easy to say “need to make savings a higher priority” from someone not stuck with an income at or below their living expenses. Isn’t it true an income of approx $21. per hour today, in buying power, is equivalent to around $3.75 an hour in the early 1970’s? Yet today they resist raising the minimum wage to $15. per hour.

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