For the first time since its launch in 2018, the report recorded a drop in the number of people considered financially healthy, falling three percentage points from last year to 31 per cent in 2022. This change erased most financial health gains people experienced in 2020 and 2021, returning financial health in the US close to pre-pandemic levels. Nearly eight million people moved from financially healthy to coping, and two million more people are now financially vulnerable. Notably, there was a six percentage point drop in the number of people reporting they spend less than or equal to their income and a three percentage point drop in the number of individuals confident in meeting their long-term financial goals.
“The data shows that while the combined pinch of historic inflation and market fluctuations has contributed to a rare drop in financial health for higher income households, lower income earners experienced
employment-related improvements like wage increases or new jobs,” said Jennifer Tescher, president and CEO of Financial Health Network. “However, even with modest gains, lower-income households are in a precarious position due to systemic financial barriers and wealth disparities. It is critical that employers, financial institutions, and policymakers prioritise financial health and collaborate for better outcomes in these uncertain times, especially as economic conditions could trigger future financial health declines.”
While this edition of the Pulse Trends report found large declines in financial health by traditionally secure groups like middle- and higher-income earners, non-LGBTQIA+ and people without disabilities, large and well-defined financial health gaps by gender, race and orientation persist (see complete data table in report):
Changes in employment circumstances and perceptions about rising prices had significant implications for people’s financial lives. While people across all income levels reported being impacted by inflation, lower income earners reported the most stress caused by higher prices. Overall, high levels of stress about inflation were associated with a three-point drop in a person’s financial health score, with food, transportation and utilities reported to have at least a moderate impact on 30 per cent or more of people’s standard of living.
At the same time, there was an association between the tightening labour market and increases in the financial health score of lower-income workers, specifically individuals making less than $30,000 per year who:
Comparably, the data showed no relationship between employment changes and changes in financial health scores for higher-income groups.
“The entire financial ecosystem has a role to play in improving Americans’ financial health,” said Jo Christine Miles, director, Principal Foundation and Principal Community Relations. “Government interventions are crucial for dampening economic blows, while products and services from financial service providers that are better designed to help consumers manage their day-to-day lives easily, securely, and affordably are crucial for building the resilience needed to ensure stability during economic volatility,”
The Pulse Trends report scores survey respondents against eight indicators of financial health — spending, bill payment, short-term and long-term savings, debt load, credit score, insurance coverage, and planning — to assess whether they are “Financially Healthy,” “Financially Coping,” or “Financially Vulnerable.” In 2020, the Financial Health Pulse began to also utilise transactional data to gain an even deeper understanding of individuals’ financial health. As of August 2022, 1080 individuals had linked at least one financial account, totaling 6,628 accounts across 2,787 institutions.
Francis is a journalist with a BA in Classical Civilization, he has a specialist interest in North and South America.
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