Jul 19, 2022
Advocacy

Research: Gauging the state of financial capability in the U.S. (FINRA triennial study)

What's the state of financial capability in the U.S.? 

Last week, FINRA's research study dropped. Here were the highlights (from press release): 

  • Fifty-three percent of respondents reported having three months of emergency savings in 2021, compared to 49% in 2018, and 35% in 2009. Further, 54% of respondents said they did not find it difficult to cover expenses and pay bills, compared to 50% in 2018 and 36% in 2009. But 20% of respondents indicated that they were laid off or furloughed in 2020 or 2021 due to the pandemic, and 26% experienced a large, unexpected drop in income.
  • Enhanced unemployment benefits and stimulus payments prompted by the pandemic may account for a portion of the financial resilience documented in the 2021 study. Stimulus funds were most frequently used to make purchases or pay bills (59%). Many Americans added the money to savings or used it to pay down debt (38% and 33%, respectively).
  • Of those who were laid off or furloughed due to COVID, 64% reported difficulty covering expenses and paying bills, compared to only 39% of those who were not laid off or furloughed. Those laid off or furloughed also had substantially higher levels of financial anxiety and were much more likely to overdraw their checking account (38% compared to 17%) and fall behind on mortgage payments (40% compared to 10%).
  • Younger adults, those who have a high school diploma or less, and those who identify as African American or Hispanic/Latino were most likely to experience unexpected income drops in 2021. Compared to white adults, a much higher percentage of African American and Hispanic/Latino adults lack health insurance (18% for African Americans and 19% for Hispanics/Latinos compared to 10% for whites), and this lack of health insurance is tied to greater levels of past-due medical bills. Further, African American adults are more than twice as likely to be unbanked compared to their white counterparts (13% compared to 6%).
  • Respondents with higher financial literacy (scoring above the median on a seven-question financial literacy quiz) were more likely to make ends meet than those with lower financial literacy. They spent less than their income (53% vs. 35%) and set aside three months’ worth of emergency funds at higher levels (65% vs. 42%). Those with higher financial literacy were also more likely to have taken steps to plan for their long-term financial future by, for example, calculating retirement savings needs (52%, compared to 29% among those with lower financial literacy) and opening a retirement account (70% vs. 43%).

Want to dig in deeper to the study? Learn more here. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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