Financial Fast Facts

 

Financial Fast Facts

 A collection of statistics about the

state of financial health in the U.S.

 

Edited by Kristen Berman and Evelyn Gosnell

People are feeling low confidence with their money:

  • In 2011, researchers at the Brookings Institute analyzed survey data for over 1,900 respondents and found that a large fraction of Americans are “financially fragile.”  More than half of the respondents declared they would “probably” be unable to come up with $2,000 within 30 days.1
  •  In 2014, the Employee Benefit Institute and Greenwald and Associates surveyed 1,000 American workers and found that less than 20% of those surveyed feel confident that they will have enough money to live comfortably through their retirement years.2
  • Less than 30% feel confident they will have enough money to cover their basic living expenses.2
  • About half of Millennials (46%) and Boomers (50%) are concerned they have too much debt.3

And feel stretched:

  • 38% of people in the US report that their families are just getting by or struggling to do so.4
  • 53% of households work multiple jobs over the course of the year.5
  • 64% of households receive variable non-reoccurring income.6
  • 97% of households had at least one month in which spending was greater than income.6
  • 63% of all households have a budget, mental or not (US financial diaries).
  • Millennials and Gen-Xers have the highest levels of spending beyond their income: 23% of Millennials and 19% of Gen-Xers.7
  • Having a bill or paycheck due before a paycheck is the leading cause of small dollar loans.8

Rightfully so…

  •  The median net worth of an American household is approximately $56,000.  This corresponds to approximated $40,00 in annual income.9
  •  As a conservative estimate, approximately 40% of the US population has a net worth of $56,000-$250,000 and corresponding annual income of $40,000-$70,000.9
  •  Ownership of various types of savings/investment accounts are on a downward trend:
    • Rates of Certificate of Deposit fell from 12.2% in 2010 to 7.8% in 2013.10 
    • Ownership of retirement accounts—including individual retirement accounts (IRAs)
    • Keogh accounts, and certain employer-sponsored accounts, such as 401(k), 403(b), and thrift savings accounts—fell below 50% in 2013. 10

Those on the bottom feel the most pinched:

  • The Survey of Consumer Finances revealed a widening gap between the wealthiest and poorest Americans.  The average income of the top 5% of households grew by 38% from 1989 to 2013 (after adjusting for inflation), whereas the average real income of the remaining 95% of households grew less than 10%.11
  •  The distribution of wealth is even more unequal than that of income. The top 5% of households held 54% of all wealth reported in the 1989 survey. Their share rose to 61 percent in 2010 and reached 63 percent in 2013. By contrast, the rest of those in the top half of the wealth distribution–families that in 2013 had a net worth between $81,000 and $1.9 million–held 43% of wealth in 1989 and only 36% in 2013. 11
  • The average net worth of the lower half of the distribution, representing 62 million households, was $11,000 in 2013 (adjusted for inflation). About one-a quarter of these families reported zero wealth or negative net worth, and a significant fraction of those said they were “underwater” on their home mortgages, owing more than the value of the home. This $11,000 average is 50% lower than the average wealth of the lower half of families in 1989, adjusted for inflation. 11
  • Retirement plan participation in 2013 continued on the downward trend observed between the 2007 and 2010 surveys for families in the bottom half of the income distribution. 10

On the upside, financial advice has the highest impact with younger people

  • 61% of Gen Y is interested in interacting with an adviser online.12
  • 59% of Gen Y is interested in attending webinars.12
  • 58% of Gen Y is interested in attending live seminars.12
  • 45% of Americans are interested in interacting with an adviser online.12
  • 47% of Americans are interested in attending webinars.12
  • 46% of Americans are interested in attending live seminars.12
  • 76% of Gen Y members want financial advice designed specifically for their needs.12
  •  72% of Gen Y members want financial advice with relevant tools and calculators that break down complex advice principles.12

After all, this same group is struggling with finances and financial literacy:

  • The FINRA Investor Education Foundation’s new study, The Financial Capability of Young Adults – A Generational View – showed that Gen Y’s have low levels of financial literacy.7
  • Only 24% of Millennials were able to answer four or five questions on a five-question financial literacy quiz correctly. And among young millennials (18 to 26) only 18% were able to answer four or five questions correctly. 7

But, advisors right now focus on the very top:

  • Within the financial advising industry, 80% of financial advisers are dedicated to individuals who have at least $250,000 in assets (not including retirement).14
  •  Half of that 80% is dedicated to individuals who have at least $1 million in assets.14

In good news, increasing saving rates has been proven possible

  • Access to 529 college savings accounts is growing through government funded programs and increased awareness. Implications include more families with college savings and increased likelihood of kids going to college. 15
  • Introduction of the myRa account will increase the availability to retirement savings to roughly half of all workers and 75% of part-time workers.16
  • Regular reminders for low income individuals does increase the number of people who meet savings goals. This is uplifting in that limited attention, which is an addressable problem, plays a role in savings behavior, not just lack of self control or perceived ability to save. Messages featuring both a savings goal (namely, a future expense) and a financial incentive are particularly effective.17
  • Interventions at tax time that increase ease of savings deposited approximately $5.9 million more into savings accounts than they would have without the intervention.18
  • Financial deprivation can change one’s mindset and make saving difficult. However, changing the frame from “savings” to “earnings” has proven to increase likelihood to save.19

Appendix:  

  1. Annamaria Lusardi, Daniel Schneider, & Peter Tufano. 2011. Financially Fragile Households: Evidence and Implications. Brookings Papers on Economic Activity, Spring 2011.
  2. Ruth Helman, Nevin Adams, Craig Copeland, & Jack VanDerhei. 2014. The 2014 Retirement Confidence Survey: Confidence Rebounds – for Those With Retirement Plans. EBRI Issue Brief, no. 397.
  3. 2014.  FINRA Foundation Finds Millenials Struggling Financially,  FINRA press release.
  4. Maximilian D. Schmeiser, David E. Buchholz, Alexandra M. Brown, Matthew B. Gross, Jeff H. Larrimore, Ellen A. Merry, Barbara J. Robels, & Logan M. Thomas. 2014. Report on the Economic Well-Being of U.S. Households in 2013. Federal Reserve System Publication.
  5. Jonathan Morduch & Rachel Schneider. 2013. Spikes and Dips: How Income Uncertainty Affects Households. U.S. Financial Diaries.
  6. Rachel Schneider & Tim Ogden. 2014. Who Are the Consumers of Financial Services? A View from the US Financial Diaries Project. 11th Annual NYU Stern-Citi Conference in Leadership & Ethics.
  7. Gary Mottola.  The Financial Capability of Young Adults—A Generational View.  Finra Investor Education Foundation.  March 2014.
  8. Rob Levy, Joshua Sledge. 2012. A Complex Portrait: An Examination of Small-Dollar Credit Consumers. Center for Financial Services Innovation.
  9. Alfred Gottschalck, Marina Vornovytskyy, & Adam Smith. 2013. Household Wealth in the U.S.: 2000 to 2011. U.S. Census Bureau press release.
  10. Jesse Bricker, Lisa J. Dettling, Alice Henriques, Joanne W. Hsu, Kevin B. Moore,
  11. John Sabelhaus, Jeffrey Thompson, Richard A. Windle, Sebastian Devlin-Foltz, Jacob Krimmel.  Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances.  Federal Reserve Bulletin.  September 2014, vol 100 n.4.
  12. Janet Yellen.  Perspectives on Inequality and Opportunity from the Survey of Consumer Finances.  At the Conference on Economic Opportunity and Inequality, Federal Reserve Bank of Boston, Boston, Massachusetts.  October 17, 2014
  13. 2012. TIAA-CREF Survey Finds Financial Advice Has Highest Reported Impact on Savings and Spending Habits of Younger Americans. TIAA-CREF press release.
  14. Patryk Babiarz, Cliff Robb.  Financial Literacy and Emergency Saving. Journal of Family and Economic Issues.  March 2014, Volume 35, Issue 1, pp 40-50
  15. Mary Beth Franklin. 2011. Financial Planning for the Middle Class: Where the middle-income crowd can get help they can afford. Kiplinger.
  16. Are Child Development Accounts Inclusive? Early Evidence from a Statewide Experiment. 2014. http://csd.wustl.edu/Publications/Documents/WP12-30.pdf
  17. https://myra.treasury.gov/
  18. Getting to the Top of Mind: How Reminders Increase Saving. Dean Karla.  Margaret McConnell† Sendhil Mullainathan. Jonathan Zinman, 2010.
  19. http://phys.org/news/2014-01-refund-tax-time-impact-household.html#jCp
  20. Sharma, Eesha and P.A. Keller, “Financial Deprivation Shifts Focus from Saving to Earning” 2014.

 

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