How are U.S. adults feeling about their financial security and ability to make financial choices that allow them to enjoy life? The latest evidence released by the Consumer Financial Protection Bureau (CFPB), supported by Abt Associates, offers the first consumer-driven look at financial well-being in America.
Americans’ feelings about their financial being vary widely, according to a new survey carried about by Abt Associates and the Consumer Financial Protection Bureau. Future studies using the same measurements should provide a measure of Americans’ financial well-being over time. In “Financial Well-Being in America,” Abt’s team of experts worked with the CFPB to collect information on a wide range of personal, situational, and financial indicators from more than 6,000 consumers nationwide. In addition, the team calculated scores for how these individuals felt about their financial well-being, using CFPB’s financial well-being scale. This scale goes beyond traditional financial indicators, such as credit score or income, to, for the first-time nationally, measure how consumers feel about their financial security and freedom of choice.
This study, said Abt Project Director Donna DeMarco, is a critical step in developing effective, evidence-based policies for helping people improve their financial health.
“We have lacked a true reliable and validated scale that can measure financial well-being between people, over time,” DeMarco said. “Financial well-being is more than a credit score. Now we have the tools to provide a detailed snapshot of what is happening across the country.”
Findings from the report include:
- Americans’ feelings about their financial well-being varies widely. On a 0 to 100 scale, the average financial well-being score for U.S. adults is 54. Approximately one-third of adults have scores of 50 or below, which are associated with experiences of material hardships and struggling to make ends. However, one-third of adults have scores higher than 60, which is associated with a low probability of having difficulty making ends meet or material hardships.
- Differences in savings and financial cushions are associated with large differences in financial well-being. Disparities in financial well-being are greatest between subgroups with different levels of liquid savings.
- Several indicators of financial confidence, knowledge, and skills appear to have strong relationships with financial well-being. Certain attitudes and behaviors – such as confidence in one’s ability to achieve financial goals, having a regular habit of saving money, and engaging in effective day-to-day money management behaviors – are all associated with higher average financial well-being.
- Many financial and demographic characteristics are associated with financial well-being, but several are not. Employment status, income, and education are all associated with financial well-being. However, no differences exist based on a region or gender. And, although there were some racial and ethnic differences in average financial well-being, these differences were relatively small compared to the differences between the subgroups based on financial experiences, attitudes, behaviors, and skills.
Importantly, the associations between these various factors and financial well-being do not necessarily imply a causal relationship. Further analysis is planned to determine whether and how various factors work together to affect financial well-being.
In addition to the report, a new public use data set is available to other financial education researchers. The data set includes de-identified data from respondents’ scores on the 10-item Financial Well-Being Scale. A user’s guide and codebook are available online.
Read the full report.
Learn more about Abt’s work in financial capability and asset building.