Financial uncertainty in America: 2021 financial health pulse shows government aid improved financial health but gains at risk as relief programs subside and pandemic lingers
Two-thirds of Americans still financially unhealthy with particular challenges facing women, LGBTQ+ communities, and people with disabilities; inequities remain by race and gender
The Financial Health Network, the nation’s authority on financial health, with support from the Citi Foundation and Principal® Foundation, today unveiled the Financial Health Pulse: 2021 U.S. Trends Report. The report, now in its fourth year, describes a dueling narrative of financial health in America as the pandemic “recovery” sits at an inflection point.
On the one hand, overall financial health improved over the last year, with more than a third (34%) of people in America now considered financially healthy, a two percentage-point increase from 2020 and the highest level since we began measuring in 2018. Government relief programs and changes in consumer spending were particularly effective at both reaching vulnerable populations and at reducing their hardship, yet a full two-thirds of Americans, or 187 million people, are still not financially healthy—whether considered Financially Coping (52%) or Financially Vulnerable (14%). And stark racial inequities remain: 39% of White individuals are considered Financially Healthy, while only 21% of Black and 24% of Latinx individuals are.
“The overall improvement in financial health shows that government interventions can have a powerful impact on the most vulnerable, including marginalized communities, but these gains are at risk as relief programs wind down,” said Jennifer Tescher, president and CEO of Financial Health Network. “It is critical that we use these insights to inform ongoing, sustained financial health policies, programs, and products that bolster these gains and better support those that are coping, including women, people with disabilities and LGBTQ+ individuals, along with Black, Latinx and low-income people.”
Indeed, historically underserved populations including Black, Latinx, Asian American people, and low-income households (under $30,000) realized significant gains. Specifically, the proportion of people considered Financially Healthy increased by 11 percentage points for Asian Americans (from 35% to 46%), nearly 10 percentage points for Black individuals (from 11% to 21%), about 3 percentage points for Latinx individuals (from 21% to 24%), and 2 percentage points for those with incomes under $30,000 (from 10% to 12%). These gains contributed to the overall number of financially vulnerable individuals decreasing by one percentage point from 2020 (to 14%).
Key findings from the report show government relief reached those who needed it and benefited their financial health:
- Financially Vulnerable individuals were 3 times more likely to receive government relief than the Financially Healthy.
- People with insufficient emergency savings were 2 times more likely to receive relief as those with sufficient emergency savings.
- Recipients of mortgage or rent relief were 50% less likely to experience increased housing insecurity in 2021 relative to 2020 (when compared with people who applied for this relief but did not receive it).
- Black people who received stimulus payments were 22% less likely to become Financially Vulnerable (compared with Black people who did not receive stimulus payments).
- Latinx people who received stimulus payments were 21% less likely to become Financially Vulnerable (compared with Latinx people who did not receive stimulus payments).
- Low-income people who received unemployment benefits were 62% less likely to become Financially Vulnerable (compared with those who applied and did not receive these benefits).
- Additionally, more than a third (34%) of individuals who received a stimulus payment reported using it to pay off their credit card debt.
“This report from the Financial Health Network offers insightful and actionable information that can help drive cross-sector collaboration to improve the financial health of all Americans,” said Brandee McHale, head of Citi Community Investing and Development and president of the Citi Foundation. “As we continue to support our communities in their economic recoveries, it is critical that we work together to develop impactful solutions that are informed by data and strengthen our collective efforts to help close the racial wealth gap in America.”
As most relief programs subside and the pandemic continues to evolve, the gains of the past year may swiftly disappear. For example:
- Despite overall improvements in aggregate financial health, individual financial health decreased for 43% of people living in America between 2020 and 2021, and 10% of people moved to a lower tier of financial health.
- People with disabilities, low to moderate incomes, or less than a bachelor’s degree were more likely to experience a decline in financial health.
- The pandemic’s continued impact on physical health and employment will hinder progress. People who took time off work to tend to a serious illness in the past year were 25% more likely to have a decline in their financial health (compared with those who did not experience this disruption).
- Individuals who worked less due to lower demand or reduced hours were 10% more likely to have a decline in their financial health (compared to those whose working hours were unchanged).
- The increases to the Child Tax Credit in 2021 will not supplant these relief programs. For example, 73% of people who received unemployment insurance in the past year do not have children under 17, and will thus be ineligible for the Child Tax Credit.
Uneven progress, especially for women
The growth in the proportion of people considered Financially Healthy was driven by positive trends across many financial health indicators, with the largest improvements occurring in people’s ability to pay bills (spend), amount of short-term savings (save), and credit score (borrow). The proportion of people who said they had enough savings to cover at least three months of living expenses grew by five percentage points, from 56% to 61% in the past year.
The reality of the pandemic played a large role in how respondents were able to navigate their financial lives. Parents were strongly impacted by school closures and the transition to virtual learning, particularly women. In fact, women were more than twice as likely as men to not work due to child care responsibilities in 2021. The proportion of women who reported not working for this reason has increased by 61% since 2020. Controlling for income, people who were unable to get to work due to childcare responsibilities (73% of whom were women) were 65% more likely to experience financial stress due to the pandemic. Unsurprisingly, women did not see the same financial health gains in 2021 as did men. The proportion of men considered Financially Healthy increased from 39% to 43%, while the proportion of women considered Financially Healthy remained constant at just 26%.
“While we all look forward to the end of the COVID-19 pandemic, we are barreling forward with two-thirds of the population still financially unhealthy and with significant and persistent financial health disparities across specific demographic and socioeconomic lines.” said Jo Christine Miles, director of Principal Foundation. “In particular, women continued to fall behind because of long standing social and environmental factors that were exacerbated by the pandemic. It’s critical that policies and solutions target support for women in order to ensure long-term economic security and a financially healthy future for all.”
New pulse data insights: Disability, LGBTQ+, and geography
Analysis of new financial health measurement data, including self-identifying categories and geographic data show:
- People with disabilities are nearly half as likely to be Financially Healthy, compared with individuals without disabilities. Among people with disabilities, 21% are Financially Healthy, while 38% of people without disabilities are Financially Healthy. People with disabilities are also approximately 2.5 times more likely to be Financially Vulnerable than people without disabilities.
- LGBTQ+ individuals are less likely to be Financially Healthy (24%) than non-LGBTQ+ individuals (35%) and more likely to be Financially Vulnerable (20% compared to 13%).
- People living in the Northeast and Midwest geographic regions are more likely to be Financially Healthy (37% each) compared to people living elsewhere in the U.S.
- While the South made the largest financial health gains over the past year, it still has the lowest financial health levels in the entire country at 31%.
The Financial Health Pulse Trends Report offers 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. Using ongoing, nationally representative surveys and transactional data, the Pulse explores consumer trends to understand how the financial health of U.S. households is changing over time, with the 2021 U.S. Trends Report providing unique insights into the financial habits of Americans over the course of the pandemic. In 2021 the team also began releasing “Pulse Points,” quarterly reports and other cuts of the data that examine trends and analyze near real-time transactional data.
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.” In 2020, the Financial Health Pulse began to also utilize transactional data to gain an even deeper understanding of individuals’ financial health. As of September 2021, 973 individuals had linked at least one financial account, totaling 6,108 accounts across 2,608 institutions.
The Financial Health Network welcomes Principal Foundation as a new initiative sponsor of the 2021 Trends Report and the ongoing transactional data-focused Pulse Points. Principal Foundation will also be the primary funder on a new report in 2022-23 which will be the first deep dive into the financial health of women in America and their challenges in building financial health. The team is open to working with other partners interested in exploring additional research opportunities. Get more information from /finhealthnetwork.org.
About the Financial Health Network
The Financial Health Network is the leading authority on financial health. We are a trusted resource for business leaders, policymakers and innovators united in a mission to improve the financial health of their customers, employees and communities. Through research, advisory services, measurement tools, and opportunities for cross-sector collaboration, we advance awareness, understanding and proven best practices in support of improved financial health for all. For more on the Financial Health Network, go to finhealthnetwork.org and follow us on Twitter at @FinHealthNet.
About the Financial Health Pulse
The Financial Health Pulse is supported by the Citi Foundation, with additional funding from Principal Foundation. Since the inception of the initiative in 2018, the Financial Health Network has collaborated with USC’s Dornsife Center for Economic and Social Research to field the study to their online panel, the Understanding America Study. Study participants who agree to share their transactional and account data use Plaid’s data connectivity services to authorize their data for analysis.