1 in 6 Americans Financially Vulnerable: Financial Health Network

One out of every six Americans is financially vulnerable, the highest percentage since before the pandemic. That is one finding in the Financial Health Pulse 2023 U.S. Trends Report, released this week by the Financial Health Network. Financially vulnerable consumers typically struggle to meet expenses, have little to no emergency savings, and have burdensome debt levels.

New findings document financial health gaps across specific demographics and socioeconomic groups, including geographic regions, for renters relative to homeowners, by overall health, and for entrepreneurs and small business employees. This year’s Pulse Trends Report was released with support from Citi Foundation and Principal Foundation.

“The transient nature of the improvements in financial health observed during the pandemic and the declining financial health of historically marginalized groups is a stark reminder of how crucial it is to maintain a focus on equity when developing products and policies to support financial health,” said Jennifer Tescher, founder and CEO of the Financial Health Network.

For the first time, 2023 data show declines in five of the eight financial health indicators across the four pillars of financial health: spend, save, borrow, and plan. The most dramatic shift observed in consumer financial health over the past year is related to spending, with less than half of all Americans (49%) reporting disposable income – generally spending less than their income. This represents the lowest number since Financial Health Network first began reporting on financial health in 2018.

Also concerning are the widening differences in financial health based on race and ethnicity. Between 2022 and 2023, the share of Black and Latinx Americans who were financially vulnerable increased by six and seven percentage points, respectively, while there was no meaningful change in the share of financially vulnerable Asian, White, or multiracial consumers. These trends mean that financial health gaps between Black and White Americans and between Latinx and White Americans grew over the past year, with Black and Latinx Americans experiencing growing challenges around borrowing and financial planning.

This year’s report delineates how a person’s employment experience is related to financial health. Even though employed Americans were less likely to be financially vulnerable than those who were unemployed (15% versus 40%, respectively), there was still wide variability in the financial health of workers depending on the size of the business they worked for. Those working at smaller businesses were more frequently financially vulnerable than those working for larger businesses. Workers at businesses with fewer than 100 employees were financially vulnerable twice as often as those with 500 or more employees (18% versus nine per cent, respectively).

The report finds a growing proportion of financially vulnerable consumers among younger Americans, resulting in widening financial health disparities between younger consumers (aged 18 to 35) and older Americans (65 and older) in the past year. Younger Americans experienced specific difficulties around spending, borrowing, and planning.

The Pulse 2023 report also shows how deeply intertwined financial health is with geography, key financial resources, and a person’s health. One out of 5 (20%) of Americans living in Southern states were financially vulnerable, a higher share than in any other region of the United States. Single women were more often financially vulnerable than single men or those who were married or partnered.

Access to a bank account may be a critical aspect of financial health, with unbanked Americans (47%) four times as likely to be financially vulnerable as those with a bank account (11%). A new measure of net worth highlights its importance for financial health, showing that almost half of those in debt (48%) were financially vulnerable compared to those with a positive net worth (six per cent).

Those with fair or poor health (37%) were financially vulnerable six times more often than those with good or excellent health (six per cent) overall.

“With 43 million financially vulnerable people living in the U.S. today, this year’s Trends Report is a sobering reminder that financial health is out of reach for many Americans,” said Kennan Cepa, principal investigator and senior manager of policy and research at the Financial Health Network. “With increases in financial vulnerability disproportionately concentrated among historically disadvantaged groups, there is an urgent need to identify solutions that work towards financial health for not just some, but all Americans.”

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