NYT: Taking the Nation's Financial Pulse in Uncertain Times

Posted June, 2020

A ONE-OF-A-KIND CONTINUING STUDY SHOWS THAT MILLIONS OF PEOPLE ARE LIVING ON THE EDGE

Millions of Americans were struggling financially, even before the Covid-19 crisis. The U.S. Financial Health Pulse shows that only 29 percent of Americans were financially healthy in 2019. Just over 70 percent of Americans were not financially healthy and may be unprepared for changes in their income, financial shocks or an economic downturn. These figures were roughly the same as 2018, but likely to change as the coronavirus outbreak takes its toll on the economy.

“Many people have been living on the edge and are just one shock away from financial instability,” says Jennifer Tescher, president and C.E.O. of the Financial Health Network. “Without a financial cushion, millions of people are exposed to financial risk during an economic downturn.”

Compared to 2018, more Americans in 2019 did not have a one-week buffer of savings and were less confident that their insurance would provide sufficient coverage to help them weather an emergency. “The Covid-19 crisis has exposed the true fragility of Americans’ financial lives,” explained Tescher.

Pulse data shows that some groups may be more vulnerable to an economic downturn than others.

More than half of women (51.2 percent) say they do not have enough liquid savings to cover three months of living expenses, an increase of 2.6 points from 2018. The average FinHealth Score for women decreased by 1.5 points between the two surveys, while the average score for men increased by 1.1 points. Women are also more likely than men to say that financial stress affects their physical and mental health, family life and performance at work.

Blacks and Hispanics have FinHealth Scores that are nearly 10 points lower than whites, a disparity that has remained steady since 2018, but may grow as the novel coronavirus takes its toll on the economy. Driving these differences in overall scores are disparities in savings and assets, and access to high-quality credit. Black and Hispanic respondents are, respectively, 38 percent and 25 percent less likely than white respondents to have a prime credit score. They are also 18 percent and 28 percent, respectively, less likely than white respondents to have at least three months of liquid savings.

Low- and middle-income respondents are also especially vulnerable to an economic downturn. Low-income respondents (those who make less than $30,000 a year) are less financially healthy than their higher-income peers. Only 10.3 percent of people in this segment are financially healthy, compared to approximately 52 percent of people with incomes above $100,000. The percentage of middle-income respondents (those who earn between $30,000 and $59,999) who say their expenses outpaced their incomes in the past year is up 4.1 percentage points from 2018.

“The gains of an economy that has grown tremendously over the past decade have not accrued to all people,” says Jimmy Chen, the chief executive and founder of Propel and a member of the U.S. Financial Health Pulse Advisory Council. Propel provides a banking app and other high-tech solutions to help low-income consumers budget, stretch their government benefits, look for employment opportunities and locate other resources. “It’s fair to say that with the constituency we serve, financial health is really fragile,” Chen added. “It’s hard to build a savings buffer when expenses are the same as your income or more.”

Read the report here