Savings are the key to financial well-being
Over 40% of Americans struggle to make ends meet.
A first-of-its-kind consumer survey has detailed the financial difficulties facing households in the United States, revealing the most crucial element of financial well-being is to build and maintain a sufficient level of savings.
The Consumer Financial Protection Bureau (CFPB) released the results of its first-ever National Financial Well-Being Survey, which measures the current financial situation of U.S. consumers.
Survey results were based on 5,000 completed responses of adults, in proportion to the US population with respect to age and ethnicity. An additional oversample of 1,000 adults aged 62 and above was also included.
The CFPB defines financial well-being as a state wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and are able to make choices that allow enjoyment of life.
The survey found more than 40% of US adults struggle to make ends meet, financially. Consumers were scored 0-100 on a financial well-being scale. The data shows the average consumer score was just 54 out of 100.
About one third (34%) of all adults in the United States returned financial well-being scores of 50 or less, while a similar proportion scored between 51 and 60 (30%), and the remainder (36%) scored above 61 out of 100.
More than two fifths (43%) of respondents admitted they struggle to pay household bills. Additionally, over one third (34%) of all those surveyed reported experiencing material hardships in the past year. Examples include running out of food, being unable to afford a place to live, or lacking the funds to seek medical treatment.
A person’s education, annual salary and employment status all appear to heavily impact financial well-being.
Older adults (61 out of 100), particularly those aged 65 and over, were likelier to be in a better financial position than younger Americans (51 out of 100), aged 34 and under, who languished below the national average.
So what is the solution to poor financial well-being? While there is no cure-all, the survey found savings and financial cushions provide the greatest differentiation between people with contrasting levels of well-being.
Disparities in financial well-being were greatest between subgroups that have different levels of liquid savings. For example, the average financial well-being of adults with the lowest level of liquid savings (under $250) was 41 out of 100. However, respondents with the highest level of savings ($75,000 or more) scored 68 out of 100.
The latest GOBankingRates survey asked more than 8,000 Americans, “How much money do you have saved in your savings account?” While the results varied, 57% of respondents said they have less than $1,000 saved.
Young adults tend to have lower salaries and hefty student debt, making it difficult to generate savings.
Selecting an appropriate savings account will ensure you’re receiving the highest returns possible. However, just like any other source of income, interest you earn from a savings account is subject to tax. Find out how.