CHICAGO, Sept. 17, 2024 (GLOBE NEWSWIRE) -- The Financial Health Pulse 2024 U.S. Trends Report, released today by the Financial Health Network, the leading voice on financial health, found that 70% of American households remain financially unhealthy with day-to-day financial realities worsening for many. The decline is offset by strengthening confidence in future financial expectations, highlighting a contradiction with important implications for those in the private and public sectors working to understand how rapidly shifting economic forces in America impact financial health.
The much-anticipated seventh edition of the Pulse Trends Report, which provides updates and actionable insights on consumer financial health in the United States as measured by eight key indicators, illustrates how some households were more acutely affected by the past year’s economic forces than others. Specifically, this year’s report found that households with credit card debt struggle more frequently with day-to-day financial challenges, including middle-income households, which were more likely to experience financial vulnerability. Alternatively, households with investments were more likely to be positive about future indicators and have steady day-to-day finances compared to the year prior.
“The data clearly show financial health in America - especially that of moderate and middle-income households – remains precarious and is influenced by a reliance on credit to stay afloat,” said Jennifer Tescher, president and CEO of the Financial Health Network. “While receding inflation and lower interest rates will likely have some positive impact, Pulse findings over time reinforce that we need systems-level change from industry and policymakers to realize significant, lasting improvements in household financial health.”
Contrasting Trends in Key Financial Health Indicators: Day-to-day vs Forward-Looking
Financial health indicators reflecting households’ ability to manage their immediate, day-to-day financial concerns showed signs of further weakening. Primary day-to-day indicators — spending less than income, paying all bills on time, and having a manageable amount of debt — declined this year. In contrast, indicators reflecting households’ future expectations, including their confidence in long-term goals and ability to plan ahead, strengthened.
“This year's Pulse shows that we may only be one economic fluctuation away from a vast swath of Americans, especially moderate- and middle-income households, being unable to meet their day-to-day financial obligations,” said Jo Christine Miles, Director, Principal® Foundation, and Community Relations. “This research underscores the urgent and dire need for researchers, employers, financial services providers, and policymakers to commit to a cross-sector, systems-level approach to both close persistent gaps in financial access and improve financial health among our most vulnerable groups and communities.”
The Role of Credit Card Debt in Financial Health
One reason for this divergence may be the impact of revolving credit at a time of high interest rates, which increase the cost of credit. Recently released data from the FinHealth Spend Report 2024, shows a ballooning of credit card costs, with an estimated 25% increase in fees and interest charged for credit card accounts that carry balances.
Trends show that in 2024, households with outstanding credit card debt were less frequently Financially Healthy and more frequently Financially Vulnerable than those without credit card debt. It also found that trends in financial health indicators over the past year depended on whether households had outstanding credit card debt.
This was especially true of moderate- and middle-income households, which saw sharp decreases in their ability to spend less than their income and pay all bills on time. Moderate income households also saw a drop in their ability to have 3 months of living expenses saved, while middle income households reported increasing levels of unmanageable debt. This may be attributed to the fact that households in these income groups most frequently hold revolving credit card debt.
Overall, between 2023 and 2024, households with credit card debt saw decreases in paying bills on time (60% to 57%), having savings for at least three months (40% to 37%), and managing their debt (51% to 48%). In contrast, households without credit card debt maintained steady day-to-day indicators and increased confidence in long-term goals (49% to 54%). Encouragingly, both groups reported more frequently planning ahead in 2024 than in 2023.
Forward-Looking Indicators Improve for Investment Holding Households
Whether a household held investments, including retirement accounts or non-retirement investment accounts, proved to be an important factor in both overall financial health and forward-looking indicators. While this intuitively makes sense, the numbers were dramatic, with those households with investments having much stronger financial health (41% Healthy) than those without (9% Healthy).
Households with investments saw year-over-year increases in future-oriented financial health indicators, including confidence in meeting long-term goals (48% to 53%) and planning ahead financially (71% to 75%), while all other indicators held steady. In contrast, households without investments experienced declines in day-to-day financial indicators, specifically on-time bill payment (52% to 49%) and debt manageability (59% to 56%) over this same time span.
Financial Health by Financial Characteristics, Household Composition, Employment and Geography
The 2024 Pulse reported on financial health across more than a dozen factors, including households with a veteran, those holding student loans, outstanding credit card debt, those with entrepreneurs, and those experiencing loss from a natural disaster. The report also looked at workers in non-traditional jobs, or gig workers, and workers who have access to employee stock ownership plans (ESOPs).
While no consumer group is a monolith, financial health indicators were influenced by characteristics strongly associated with these different financial experiences and types of financial resources. Noteworthy data on this topic includes:
- U.S. veteran households had stronger financial health than households without a U.S. veteran, with veteran households more frequently Financially Healthy (42% vs 29%) and less frequently Financially Coping (46% vs 54%) or Financially Vulnerable (12% vs 17%).
- Student loans continue to have an outsized impact on financial health. Households with student loans are 19% Financially Healthy while those without this type of debt are 34% Financially Healthy.
- Entrepreneur households (those with at least one business owner in the household) were more frequently Financially Healthy (36%) and less frequently Financially Vulnerable (9%) than households without a business owner (30% and 17%, respectively).
- Employees with access to ESOPs were more frequently Financially Healthy (41% vs 29%) and a third less often Financially Vulnerable (5% vs 15%) than workers without access to ESOPs.
- Geographically, households in the West and Northeast increasingly reported confidence in long-term financial goals and little decline in day-to-day indicators, while day-to-day indicators declined for households in the South and Midwest.
As in years past, the results across household characteristics show persistent and vast disparities in financial health by race and ethnicity, gender, disability, and other dimensions of identity, requiring coordinated, systems-level change to close these gaps.
- Between 2023 and 2024, day-to-day financial health indicators declined for people with disabilities. The percentage of people with disabilities with enough savings to cover at least three months of living expenses declined from 47% to 42%, and the percentage with manageable or no debt declined from 63% to 57%.
- Black households less frequently reported spending below their income in 2024 than they did in 2023 (42% to 35%).
- A smaller share of Latinx households reported paying their bills on time in 2024 (54%) than they had in 2023 (64%) and there was a decline in the share of Latinx households who were confident their insurance policies would cover them in an emergency (53% to 46%)
“A drop in interest rates may provide some relief for American households struggling with day-to-day finances, but industry actors still have a role to play in pushing towards improved financial health for all,“ said Kennan Cepa, principal investigator of the Pulse initiative and Director, Policy and Research at the Financial Health Network. “By embracing financial health in product design and ensuring access to essential workplace benefits, industry can be critical drivers of financial health even when macroeconomic forces pose a challenge for consumers.”
This year’s Pulse report, which was released with support from Principal Foundation, places a greater emphasis on year-over-year changes in individual Financial Health Indicators, providing insight into the specific aspects of financial health needing the most urgent attention from stakeholders. Additionally, it shares insights on the financial health of American households, as opposed to individuals, which aligns Pulse research with the field of household finance research.
Methodology
The findings in this report are drawn from data collected from two surveys fielded in the spring of 2023 and the spring of 2024. Financial Health Pulse surveys are fielded using the probability-based Understanding America Study (UAS) online panel, allowing the findings to be generalized to the civilian, noninstitutionalized, adult population of the United States. The 2024 Financial Health Pulse survey was fielded from April 16, 2024 through May 30, 2024 with 7,245 respondents and a cooperation rate of 65.67% (1.15% margin of error). The data were weighted using U.S. Census Current Population Survey benchmarks and are representative of the non-institutionalized adult population of the United States with regard to gender, race/ethnicity, age, education, and census region. For more background on the report’s methodology visit: https://finhealthnetwork.org/research/financial-health-pulse-2024-u-s-trends-report/#methodology
About the Financial Health Network
The Financial Health Network is the leading authority on financial health. We are a trusted resource for business leaders, policymakers, and innovators united in a mission to improve the financial health of their customers, employees, and communities. Through research, advisory services, measurement tools, and opportunities for cross-sector collaboration, we advance awareness, understanding, and proven best practices in support of improved financial health for all. For more on the Financial Health Network, go to www.finhealthnetwork.org and follow us on Twitter at @FinHealthNet.
Contact:
Michael Salmassian
Financial Health Network
msalmassian@finhealthnetwork.org
