Americans regain some financial footing
Many better able to pay bills and save, but some still struggle
Americans have made big strides since the depths of the recession, with fewer fretting about paying bills and nearly half putting aside cash for a rainy day. But debt remains a heavy burden, and certain groups — the young, the less educated and many people of color — continue to have a more difficult time than others.
Those are some of the key findings of the 2016 National Financial Capability Study, released Tuesday by the FINRA Investor Education Foundation.
The survey of 27,564 Americans, from June through October of last year, found that 48% did not struggle to pay bills and take care of expenses — a jump of 12 percentage points from 2009.
“There’s likely a correlation with the improvement in the economy,’’ says Gerri Walsh, president of the FINRA Foundation.
When it came to stashing away money in an emergency fund, 46% had set aside enough to get them through three months — a time period recommended by many financial advisers — an 11point uptick vs. 2009. Additionally, more than half of those using credit cards reported that they pay their balance off each month — the highest percentage since the survey began.
But some significant challenges persist, particularly for certain groups of Americans, such as Millennials, those whose education does not go beyond high school and blacks and Latinos.
For instance, when it came to tapping payday loans or other alternative forms of borrowing that can carry much higher interest rates than conventional loans, 39% of blacks and 34% of Latinos had used at least one of those methods. That’s compared with 21% of whites and 21% of Asians.
“The data tell us the what, but not the why,” Walsh says. “Access to traditional banking services can be one factor. Access to credit is also challenging. Even with the economy recovering, we’ve seen a tightening of credit, and so some individuals who might have been able to use credit cards to float past a financial shock might have to turn to other, alternative banking systems.’’
Among those ages 18 to 34, 29% said they had been tardy paying their mortgage, vs. 16% of those ages 35 to 54. And 45% of all respondents who did not have an education beyond high school said that if they had an emergency requiring them to pull together $2,000 within a month, they wouldn’t be able to do so.
The percentage of Americans who have some kind of retirement account rose from 54% in 2012 to 58% last year. But rather than focusing on the longer term, 41% of Americans plan their spending and budgeting for just the next few months or year.
“Only about 40% of Americans are spending less than their income (meaning) they have something to set aside and save,’’ Walsh says. “When you’re not able to make ends meet, you probably do tend to focus more on the here and now.’’
And while more people are paying off monthly credit card balances, two in five Americans still engage in costly habits such as taking out cash advances or paying only the minimum due.
How financially literate are you? Take FINRA’s interactive quiz at www.us financial capability .org/quiz .php