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Most Americans’ financial health worsening: Report

Many Americans saw their financial health decline in 2022, more than at any point in the last five years.

That is a crucial finding of the Financial Health Network’s Financial Health Pulse: 2022 U.S. Trends Report. It is the fifth annual edition.

The number of people considered financially healthy fell three points to 31%, erasing many gains realized in 2020 and 2021. Many groups fared worse:

  • Almost eight million people moved from “financially healthy” to “coping”;
  • Two million more people are now “financially vulnerable”;
  • Six percent fewer people said they spend less than or equal to their income;
  • Three percent fewer folks reported confidence in their ability to meet their long-term financial goals;
  • Those making $60,000-$99,000 saw their financial health rate decline by seven points to 36%;
  • People earning six-figure incomes saw their health fall by four points;
  • Men’s health fell by four points and women’s three;
  • The Black community’s financial health plummeted six points to 15%;
  • The number of people with enough savings to cover three months of living expenses fell three points.

“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.

Jennifer Tescher, president and CEO of Financial Health Network head shot
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. Employers, financial institutions, and policymakers must prioritize financial health and collaborate for better outcomes in these uncertain times, especially as economic conditions could trigger future financial health declines.”

Vulnerable groups were hit hard.

Those earning less than $30,000 only had a 10% financial health rate, while those in the $30,000-$59,999 bracket had a 23% score.

Black and Latinx people had scores of 15% and 23%, much lower than Asians (44%) and whites (35%).

Men are 60% more likely to be financially healthy than women (39% vs. 23%). People without disabilities have higher financial health levels than those with disabilities (35% vs. 20%). Non-LGBTQIA+ people (32%) are financially healthier than LGBTQIA+ (23%).

Vice-president of policy and research Angela Fontes said that in one sense, it was a surprise to find middle and higher-income individuals experience a steeper drop in their financial health than those from lower-income levels.

“We certainly can’t say conclusively with our data, but what the timing of the suggests is that as some of the stimulus package payments and the additional unemployment benefits start to go away, those households who got the bump in financial health related to those are now seeing the impacts of those going away.”

Those from lower-income levels already are far less likely to be financially healthy. There’s only one way to head if they can. 

“Some of those same stimulus payments, or the pandemic-related benefits, were not enough to get those low-income households out of the financially vulnerable category,” Fontes said. “They didn’t bump up, so they’re not bumping back down.”

Looking ahead, Fontes said she is watching how inflation affects American families. However, to truly understand its impact, you have to dig. There are different rates for different baskets of goods, so the overall rate will not reflect many people’s specific experiences.

She also wonders how families will react to the declining impact of federal subsidies. While many will benefit from the recently-announced student loan forgiveness, some will not see much change.

We know from some of the current research that $10,000, for many folks, is a drop in the bucket compared to their overall student loan debt. It’s certainly welcome, but it won’t get them free and clear that debt.”

Rising interest rates will make it harder to refinance student debt, Fontes added.

  • Tony Zerucha

    Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.