32% of Americans Are Financially Insecure

Despite the robust job market, many Americans are financially insecure—a substantial 32 percent of the nation's adults in 2017, according to the Urban Institute. This estimate comes from the The Well-Being and Basic Needs Survey, a new effort by the Urban Institute to measure financial insecurity.

The Urban Institute classified survey respondents as financially insecure if they had experienced at least one of three things in the past 12 months: 1) they were not sure they could come up with $400 for an unexpected expense; 2) they had missed a credit card or nonmortgage loan payment; and/or 3) they had been contacted by a debt collector. Fully 32 percent of adults were found to be financially insecure—22 percent were not confident they could come up with $400 for an unexpected expense, 14 percent had been contacted by debt collector; and 13 percent missed a loan payment. Here are some of the demographics of financial insecurity...

• Financial insecurity does not vary much by age, with 27 percent of 50-to-64-year-olds, 34 percent of 35-to-49-year-olds, and 36 percent of 18-to-34-year-olds financially insecure. 
• Race has more of an impact on financial insecurity, with Blacks most likely to be insecure (52 percent), followed by Hispanics (40 percent), and non-Hispanic Whites (27 percent). 
• Education matters even more than race. Fully 51 percent of people with less than a high school education and 38 percent of those with a high school diploma/some college were financially insecure. Among college graduates, the figure was a much smaller 17 percent. 
• Income matters a bit more than education. Among people with household incomes below poverty level, 58 percent were financially insecure. Among those with household incomes above 400 percent of poverty level, the figure was 14 percent. 

Despite the improving economy of 2017, concludes the Urban Institute, "many Americans are facing financial distress and struggle to keep up with their bills and cover unexpected expenses."

Source: Urban Institute, Financial Distress among American Families: Evidence from the Well-Being and Basic Needs Survey

ACA Boosts Financial Security

Better physical health is not the only potential benefit of the Affordable Care Act, according to a Liberty Street Economics analysis. Financial health also appears to improve when more Americans have health insurance. Using data from the Federal Reserve Bank of New York's Consumer Credit Panel, fed researchers analyzed credit card balances and credit scores by county in states that did and did not expand Medicaid. Their conclusion: the expansion of Medicaid has a led to "average per capita credit card balances declining in the counties most affected by the Medicaid expansion." Credit scores increased the most in those areas as well.

"We offer suggestive early evidence that the Medicaid expansion is fulfilling the goal of health insurance: providing 'peace of mind' by protecting against financial hardship," conclude the researchers, who will continue to investigate these dynamics as more data become available.

Source: Federal Reserve Bank of New York, Liberty Street Economics, Is Health Insurance Good for Your Financial Health?

Most Americans Do Not Have A Will

Only 44 percent of Americans have a will, according to a Gallup survey, down from 51 percent in 2005. The percentage with a will has declined in every age group since 2005. Here is the percentage with a will by age in 2016...

Percent with a will
Aged 18 to 29: 14%
Aged 30 to 49: 35%
Aged 50 to 64: 56%
Aged 65-plus: 68%

Source: Gallup, Majority in U.S. Do Not Have A Will

Most Are Clueless about Retirement Needs

Most of the nation's workers say they need to save at least $1 million to feel financially secure in retirement, according to the 16th Annual Transamerica Retirement Survey of Workers. Fully 57 percent of Gen Xers feel that way, as do 55 percent of Millennials and 53 percent of Boomers. But this is how much workers have saved so far, by generation...

Total household retirement savings
Millennials: $25,000
Generation Xers: $61,000
Baby Boomers: $132,000

Clearly, the nation's workers are so far from achieving their $1 million retirement security goal that it's safe to say most will never make it. Perhaps a little planning is needed. When asked how they came up with the $1 million estimate of needed savings, 57 percent of Millennials, 55 percent of Gen Xers, and 49 percent of Boomers say it's just a guess. Only 16 to 24 percent have made an estimate of retirement savings needs based on current living expenses, and the percentages who have used a retirement calculator, completed a worksheet, or talked to a financial advisor is in the single digits.

Source: Transamerica Center for Retirement Studies, 16th Annual Transamerica Retirement Survey of Workers

Financial Stability More Important than Mobility

Americans far prefer financial stability to financial mobility, according to Pew Charitable Trusts' Survey of American Family Finances...

Which is more important to you—financial stability or moving up the income ladder?
Moving up: 8%
Financial stability: 92%

Source: The Pew Charitable Trusts, Survey of American Family Finances

Feelings of Financial Security Depend on Day of Month

Americans are more likely to feel financially secure on the first day of the month than on the last day of the month, according to Barriers to Saving and Policy Opportunities—the third in a series of three issue briefs from Pew Charitable Trusts' Survey of American Family Finances.

This curious day-of-the-month finding makes sense when you know the context in which most Americans live: 55 percent of households spend all or more their income most months, and 60 percent experience at least one financial shock in a 12-month time period. Little wonder, then, that as a month progresses a substantial share of households discover they don't have enough money to make ends meet.

On the first day of the month, 52 percent of Americans feel financially secure. On the last day of the month, only 34 percent feel secure. "The data show that, for many respondents, perceptions of well-being are driven more by their financial conditions at the moment than by the longer-term outlook," concludes the report. These short-term shifts in opinion are crucial to policy and program participation and effectiveness."

Source: Pew Charitable Trusts, Barriers to Saving and Policy Opportunities

Empty Piggy Banks

How much money could the typical household access within 30 days to cover the cost of a financial shock? According to the Survey of American Family Finances, the median household could get its hands on just $3,000 within 30 days. That's not much of a buffer, and it includes credit cards and help from friends and family.

In the second of three reports on the finances of American households, Pew Charitable Trusts examines the financial assets available to families when they experience a financial shock. That's when, not if. Financial shocks are the norm. Fully 60 percent of households experienced a financial shock in the past year, according to the findings of Pew's first report, available here.

One of the most important resources for weathering a financial shock is liquid savings, which Pew defines as money in a checking or savings account, cash saved at home, and the value of unused prepaid cards. The typical household has only $3,800 in liquid savings, and a substantial one in four has less than $400.

Source: The Pew Charitable Trusts, What Resources Do Families Have for Financial Emergencies?

60% of Households Experience Financial Shocks

In a year's time, most households experience a financial shock, according to Pew Charitable Trusts Survey of American Family Finances. In the survey, Pew asked a nationally representative sample of Americans whether they had experienced any of the following unexpected financial shocks: income cut; hospitalization; separation, divorce, or widowhood; major vehicle repair; major housing repair; or some other large unexpected expense. The 60 percent majority of households had experienced one or more shocks in the past 12 months...

30% had a major car repair
24% had a major home repair
24% experienced a hospital trip
24% experienced a pay cut
3% experienced separation, divorce, or widowhood
10% experienced other large, unexpected expenses

How much do these shocks set people back? The median cost of the average household's most expensive shock was $2,000, says Pew. Such shocks have psychological consequences. Among households that did not experience a shock, 64 percent reported feeling financially secure. Among those who did, only 41 percent felt secure. In the coming weeks, Pew will examine the resources available to families to help them weather these all too common financial shocks.

Source: Pew Charitable Trusts, How Do Families Cope with Financial Shocks?