CEO Jennifer Tescher
CEO Jennifer Tescher

Pandemic highlights American wealth disparity

The Financial Health Network, the nation’s authority on financial health, in partnership with Flourish Ventures, MetLife Foundation, and AARP, today released the U.S. Financial Health Pulse 2020 Trends Report, revealing an uneven impact to financial health over the last year. 

While the topline data shows 33 per cent of people in America are financially healthy, a four-point increase over 2019, two-thirds remain financially coping or vulnerable, and inequities persist, amplified by the economic fallout and changes in consumer behavior related to the pandemic.

“Financial health is an essential measure of Americans’ financial resilience, which has been put to the test by the global pandemic,” said Jennifer Tescher, president and CEO of the Financial Health Network. “Unfortunately, the results demonstrate that race, income and gender impact people’s ability to weather a shock, underscoring the need for investments and interventions in financial health equity.” 

Jennifer Tescher
Jennifer Tescher

Key findings from the 2020 report include:

  • 33 per cent of people in America are financially healthy, an increase likely equated to short-term recovery efforts and changes in consumer behavior amidst the pandemic.
  • Two-thirds of Americans are still financially coping or vulnerable.
  • The average financial health of people with household incomes above $100,000 improved the most over the past year, while people making less than $30,000 did not see any average improvements.
  • As of August 2020, only 15 per cent of Black people and 24% of Latinx people were financially healthy, compared with 39 per cent of White people and 39 per cent of Asian Americans.
  • The gap in financial health between men and women is significant (40 per cent of men compared to 28 per cent of women are financially healthy); however women showed greater overall improvements in financial health since 2019.
  • Younger and older Americans did not experience any average changes to their financial health in the past year compared to late Millennials, Gen Xers and early Boomers (36-64 years olds) who saw their financial health improve.

“The financial health divide has widened by income and race, and the gender gap has persisted,” said Emmalyn Shaw, managing partner at Flourish Ventures. “While we see headlines that the stock market is strong and that some Americans are putting historic amounts of money into savings, most of America continues to struggle. These latest Pulse Report findings reinforce the importance of continued technology innovation in financial services and policy initiatives that promote a fair and inclusive financial system.”

The data revealed that government interventions such as federal stimulus payments and state relief policies offered lifelines for those who were experiencing financial strains and shocks, while temporary economic closures helped bolster already economically secure individuals through behavioral shifts. It’s no surprise those who were already in a strong financial position were able to maneuver the unexpected difficulties of the pandemic. However, with nearly two-thirds of people financially coping or vulnerable, there are ongoing concerns about how a return to “normal” could negatively impact their ongoing financial health. 

“The latest Pulse study sheds light on the unequal financial health impact of the pandemic,” said MetLife Foundation president and CEO Dennis White. “At MetLife Foundation, we are committed to expanding opportunities for low- and moderate-income people, and building a more equitable society. Supporting research like the Pulse study helps encourage innovative solutions to persistent financial health challenges.”

Indicators of financial health highlight disparities 

Four financial health indicators highlighted the vacillations within people’s financial lives beyond the aggregate number. These indicators offer significant insights into the impact the pandemic had on financial health behavior in 2020 across demographics. 

  • Spend – 57 per cent of people in America said their spending was less than their income, up from 54 per cent in 2019 and 53 per cent in 2018. This increase is likely the result of strong economic growth over the past two years, combined with a broad array of government interventions — including the stimulus payments, the additional $600 in federal unemployment insurance, and the Payment Protection Program (PPP) loans — that helped people make ends meet during the pandemic.  
  • Save – Transactional data shows that liquid savings balances on average grew 65 per cent during the pandemic. As of August 2020, nearly 60 per cent of Americans had enough savings to cover at least three months of living expenses, an increase from 53 per cent in 2019 and 55 per cent in 2018. Much of this increase is attributed to people with higher incomes who were able to reduce their spending more than people with lower incomes.
  • Borrow –  Black and Latinx people were significantly more likely than White people to say their debt was unmanageable, 39 per cent to 23 per cent. Among all those who applied for some type of debt relief since March, Black borrowers were least likely to receive relief: 61 per cent of Black borrowers said they received that relief, compared with 73 per cent of Latinx borrowers and 75 per cent of White borrowers. This gap can be partially attributed to decades of discriminatory lending, employment, and housing practices that have denied Black and Latinx people equal access to affordable credit.
  • Plan – 52 per cent of people in America said they were confident they would have sufficient insurance coverage to manage an emergency, a significant decline from the 58 per cent of people who reported this in 2019, and the 61 per cent of people who reported this in 2018. Additionally, the pandemic has seen a growth in households planning ahead (64 per cent) as of August 2020, a five-point increase from 2019.

“The ability to track changes over time and uncover disparities in the underlying drivers of financial wellbeing is what makes the U.S. Financial Health Pulse so valuable,” said Debra Whitman, executive vice president and chief public policy officer at AARP. “This report not only finds that Black and Latinx individuals are more burdened by debt, but they are also less likely to receive debt relief from creditors during these difficult times. It is insights like these that can inform policies and solutions that truly help people.”

The U.S. Financial Health Pulse, now in its third year, has established a precedent for offering an accurate and nuanced picture of the financial lives of people living in the U.S., compared to aggregate economic indicators such as market and employment numbers. Going forward in 2021, the team will be considering quarterly reports and other cuts of the data to examine trends and analyze near real-time transactional data. 

The Financial Health Network is open to working with partners interested in exploring additional research opportunities. More information can be found here

The Pulse scores survey respondents against eight indicators of financial health — spending, bill payment, short-term and long-term savings, debt load, credit score, insurance coverage, and planning — to assess whether they are “financially healthy,” “financially coping,” or “financially vulnerable”. For the first time, the U.S. Financial Health Pulse utilized transactional data to gain an even deeper understanding of individuals’ financial health. 

As of July 2020, 835 individuals had linked at least one financial account, totaling 5,219 accounts across 2,312 institutions. 

For additional findings or more information regarding the U.S. Financial Health Pulse, please see the 2020 report.

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