Americans Facing Harsher Financial Conditions Today
U.S. adults are having more trouble making ends meet and saving for emergencies, reveals new findings out today from the FINRA Investor Education Foundation.
The National Financial Capability Study, conducted every three years since 2009, highlights the financial lives of U.S. adults. Following a 12-year period of sustained improvements in different components of financial capability, FINRA’s latest study reveals tough declines in areas of financial wellness.
While FINRA finds no overall declines in income, it notes how growing costs triggered by inflation have financially strained U.S. households—more so compared to previous waves.
“There’s a 10-percentage point drop in the number of people who say they find it easy to cover their bills,” said Gary Mottola, research director at the FINRA Investor Education Foundation, in a press call with reporters. “There are 26 million more people who are struggling to make ends meet compared to 2021.”
“There are 26 million more people who are struggling to make ends meet compared to 2021.”
Gary Mottola, FINRA
Middle-income households were likelier to feel more pressure compared to other groups, despite having stable incomes. Households who earned salaries between $25,000 and $75,000, who had some college education but no degree, and who were between the ages of 35 and 54 shared similar financial struggles with low-income households, individuals with no college experience and younger age cohorts. These resemblances include a difficulty in making ends meet, the impact of increased food costs, dedicating funds to emergency savings, and engaging in expensive credit card practices, according to FINRA.
“The struggle seems to have broadened out,” noted Olivia Valdes, a senior researcher at the foundation.
The study focused on four pillars that determined financial capability: Making ends meet; planning ahead; managing financial products; and financial knowledge
It reported that while a higher number of workers said that they are struggling in their-day to-day, 70% still reported feeling confident in achieving their financial targets. U.S. adults said they were spending more than their income, and a fewer number admitted feeling satisfied in their overall financial condition. “In the face of headwinds, there is still this underlying confidence that they can meet their financial goals,” Mottola said.
Retirement planning varies
FINRA’s study also noted the variation of those saving for retirement versus those who are not.
According to the findings, 80% of college graduates have a retirement account, compared to 37% of those without any college experience. Only 16% of respondents with incomes less than $25,000 have a retirement account, while 85% of those earning $75,000 are enrolled. Those with children were also likelier to participate in a retirement plan.
Still, a majority of U.S. adults seem to forego any retirement preparation, the research suggests. Thirty-nine percent of respondents have tried to figure out the amount needed to save for retirement while 57% have not, even as 57% report being enrolled in some type of retirement account, whether employer-sponsored or independent.
“Part of this may be because they’re struggling elsewhere to make ends meet,” observed Valdes. “It’s difficult to plan ahead for the future. Unfortunately, we are not seeing those rates at the levels that we would like.”
Merging human advice with AI
As artificial intelligence (AI) technology emerges in financial advice and retirement planning, FINRA’s study asked respondents a new question assessing the popularity and usage of AI.
The findings show that even as 20% of respondents displayed interest in receiving financial advice from AI, 59% said they weren’t interested and 21% admitted to feeling unsure.
Respondents under age 55 were likelier to want to engage in such advice than those age 55 and older. Men were also more interested in using the technology for these purposes compared to women, as were respondents of color, FINRA reported.
Despite some reluctancy from respondents, FINRA experts note that the emerging technology is expected to only grow in the coming years. Rather than use it exclusively for financial advice, investors are going to want to merge the technology with human advice and resources.
“The most important thing is to consider multiple sources,” said Gerri Walsh, president of the foundation. “You want to make sure that you’re using trusted sources. But Generative AI is here. People are using it and are interested in using it.”
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
