Financial Vulnerability on the Rise in the United States, According to New Report
One in six Americans is currently facing financial vulnerability, the highest percentage since before the pandemic, according to the Financial Health Pulse 2023 U.S. Trends Report released this week. The report, supported by the Citi Foundation and Principal Foundation, highlights various financial health gaps among different groups.
Financially vulnerable consumers typically struggle with meeting expenses, have little to no emergency savings, and carry burdensome debt levels. This year’s report reveals disparities in financial health across demographics and socioeconomic groups, including geographic regions, renters versus homeowners, overall health, and entrepreneurs and small business employees.
The report emphasizes the transient nature of the improvements in financial health observed during the pandemic and the declining financial health of historically marginalized groups. The Financial Health Network’s founder and CEO, Jennifer Tescher, stresses the importance of maintaining a focus on equity when developing products and policies to support financial health.
For the first time, the 2023 data show declines in five of the eight financial health indicators across the four pillars of financial health: spend, save, borrow, and plan. The most significant shift observed in consumer financial health over the past year is related to spending, with less than half of all Americans (49%) reporting disposable income.
The report also highlights the widening differences in financial health based on race and ethnicity. Between 2022 and 2023, the share of financially vulnerable Black and Latinx Americans increased by six and seven percentage points, respectively. This has led to growing challenges around borrowing and financial planning for these groups, resulting in widening financial health gaps compared to White Americans.
Employment experience is also closely tied to financial health, as employed Americans are less likely to be financially vulnerable compared to the unemployed. However, the report reveals that workers at smaller businesses are more frequently financially vulnerable than those at larger businesses. Workers at businesses with fewer than 100 employees were financially vulnerable twice as often as those at businesses with 500 or more employees.
The report further shows a growing proportion of financially vulnerable consumers among younger Americans, leading to widening financial health disparities between younger and older Americans in the past year. Younger Americans faced specific difficulties with spending, borrowing, and planning.
Geography, access to key financial resources, and an individual’s health are also key factors influencing financial health. The report reveals that one out of five Americans living in Southern states is financially vulnerable, the highest share among all regions in the United States. Single women are more often financially vulnerable compared to single men or those who are married or partnered.
The report also highlights the critical aspect of access to a bank account for financial health. Unbanked Americans are four times more likely to be financially vulnerable compared to those with a bank account. Additionally, the report introduces a new measure of net worth, showing that nearly half of those in debt are financially vulnerable compared to those with a positive net worth.
Lastly, the report underscores the correlation between health and financial vulnerability. Those with fair or poor health are six times more likely to be financially vulnerable compared to those with good or excellent health.
Overall, the Financial Health Pulse 2023 U.S. Trends Report highlights the increasing financial vulnerability in the United States and the need for targeted efforts to address these disparities and support the financial health of all Americans.
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