Consumer Finance Survey Summary of 2018 Results
Too many of the moderate-income consumers have holes in their rainy day fund umbrellas
- 38 percent of adults with income below $75,000 have no emergency savings in place.
- Moderate-income renters are much more vulnerable to financial stress than homeowners
- 58 percent of adults with income below $75,000 do not follow a follow a formal budget plan.
- 36 percent of consumers surveyed don't have both a checking and savings account
What's the problem?
On March 20, NeighborWorks America released highlights from its fifth annual consumer finance survey, the first to focus primarily on households with household income $75,000 or below.
Chief among the findings is the alarming fact that more than one-third (38 percent) of households have no emergency savings in place — whether that's to pay for the repair of a car that's required to get to work, or to fix a major household necessity such as a roof or furnace.
A financial emergency is devastating for many consumers
A significant number of consumers are having a difficult time finding their financial footing, despite a growing economy and near-record low unemployment. Forty-four percent of adults in the NeighborWorks America survey said that they were not confident in their ability to withstand an unexpected financial shock. Moreover, when analyzing the responses by homeowner and renter, dramatic differences appear. Fifty-seven percent of renters are not confident that they could withstand a sudden financial emergency, compared to 31 percent of homeowners.
A similar story is seen when looking at how long a homeowner or renter believes their savings would last in case of financial emergency. Forty-three percent of consumers overall said that their savings would last a month or less in an emergency, but 31 percent of homeowners said their money would last a month or less, compared to 56 percent of renters.
Why does this demand our attention?
The economy has been expanding for more than eight years, and the unemployment rate is extremely low. But families are finding it difficult to save for an emergency and very few are prioritizing retirement. The NeighborWorks survey found just 12 percent of these adults cite saving for an emergency as their most important financial goal, while only eight percent list saving for retirement most important. That's not surprising when more than twice as many people (28 percent) said that paying bills was their most important financial goal, and 18 percent ranked paying down credit card debt as their chief financial goal.
What is the solution?
It is critical for all adults — renters and homeowners — to have a sound budget and financial plan that includes a strategy for building an appropriate "nest egg" that could tide them over for at least three months if necessary, and that acts as a foundation for the future.
NeighborWorks America is committed to helping adults achieve this goal by training nonprofit professionals to offer services in their communities that build "financial capability." Helping individuals and families establish and sustain an emergency savings account, budget for important purchases and plan for retirement are some components of financial capability programming, which are offered in both group education classes and via one-on-one coaching.
In addition, NeighborWorks America also is committed to assisting its network of nearly 250 local nonprofits connect with consumers and encourage greater participation in the formal banking system. According to the survey, more than one-third (36 percent) of families with household income below $75,000 do not have both a checking and savings account with a bank or credit union. As a result, these consumers are forced to pay significant amounts of money each month to manage routine financial transactions using non-bank services.
This national consumer finance survey was conducted by Widmeyer Communications, A Finn Partners Company, to understand the financial literacy and capability of American households: February 16-21, 2018. It was conducted online with a nationally-representative sample of 1,000 U.S. adults with household incomes under $75,000 a year. The data were weighted slightly by gender, race, age, education and income to be representative of the US population.