“Despite positive financial health trends at the national level, the majority of people in America are still not financially healthy.”

U.S. Financial Health Pulse, we find that more people in America were Financially Healthy as of August 2020 than they were in 2019.

Building upon the foundation of a strong pre-pandemic economy, it appears that an array of stimulus policies, debt relief measures, economic shutdowns, and consumer behavior changes have temporarily blunted the worst effects of the economic crisis for many people.

But a majority of people in America (67%) are not financially healthy; these individuals have little financial cushion should relief measures subside and economic conditions worsen. Among those who are struggling financially, millions of people are experiencing extreme financial hardship. We also find that profound disparities in financial health have persisted, and in some cases widened, across race, income, and gender.

From the U.S. Financial Health Pulse, we find that more people are Financially Healthy in 2020 than they were last year. But many people are still struggling financially and there is evidence that financial health disparities have widened over the past three years.

In the long-term, solutions that address systemic barriers to financial health – such as policies that ensure pay equity, living wages, workplace protections, affordable healthcare, and access to high-quality financial products and services – are necessary to ensure equitable financial health outcomes for all.

• Indicator 1 – Spend Less than Income – As of August 2020, 57% of people in America said their spending was less than their income over the last 12 months, a significant increase from the 54% of people who reported this in 2019 and the 53% of people who reported this in 2018 (Figure 6). This increase is likely the result of strong economic
  growth over the past two years, combined with a confluence of recent interventions and events that have increased people’s income, while reducing their overall expenses over the last few months. On the income side, the stimulus payments, the additional $600 in federal unemployment insurance, and the Paycheck Protection Program loans temporarily increased many people’s disposable income over the spring and summer.11
• Indicator 2 – Pay Bills On Time:  As of August 2020, 69% of people in America said they paid all of their bills on time over the past 12 months, an increase from 2019 and 2018, when 66% and 64% of people reported this (Figure 9).17  This upward trend is likely the result of the confluence of factors discussed in the previous section: economic growth prior to the onset of the pandemic, government stimulus measures, forbearance and relief measures, state lockdowns, and changing consumption patterns have left people with more money to put toward bill payments. In fact, as of May 2020, nearly half of people (45%) who had received a stimulus payment by May said they used the funds from that payment to pay their rent, mortgage, or utility bills (Table D5)
• Indicator 3 – Liquid Savings:  As of August 2020, 59% of people in America said they had enough savings to cover at least three months of living expenses, an increase from 53% in 2019 and 55% in 2018 (Figure 12). The upward trend over the past year is likely the result of strong economic growth since 2018, the recent stimulus and relief measures, and a reduction in consumption during state lockdowns.24 These self-reported trends align with reports from the U.S. Bureau of Economic Analysis showing that the U.S. personal savings rate hit an all-time high in April 2020.25
• Indicator 4 – Long-Term Savings:  As of August 2020, nearly half of people in America (47%) said they were confident they were on track to meet their long-term financial goals, a significant increase from 2019 when 39% of people reported this, and 2018 when 40% of people reported this (Figure 15). These sentiments are supported by national data from Fidelity showing that average balances in IRAs, 401(k)s, and 403(b)s grew significantly during the second quarter of 2020 as the stock market soared.29
• Indicator 5 – Manageable Debt:  As of August 2020, more than half of people in America (55%) said their debt was manageable, an increase from 2019 and 2018 when 52% and 53% of people reported this (Figure 16). A decrease in overallhousehold debt is likely driving people’s improved perceptions about the manageability of their debt.  According to the Federal Reserve, total household debt decreased by $34 billion from April to June 2020, as people cut back on their expenses, reduced new borrowing, and focused on paying off outstanding debt.30 Mortgage payment deferrals and the federal moratorium on student loan obligations may have also contributed to improved sentiments about debt manageability.31
• Indicator 6 – Credit Scores:  In August 2020, nearly seven in 10 people in America (69%) said they had a prime credit score, an increase of 3 percentage points from previous years, when 66% of people reported this (Figure 22). These figures align with nationally representative data from Experian showing that VantageScores generally improved in the early months of 2020.36 While credit score calculations are based on a variety of inputs, an overall reduction in household debt (pg. 27), changes in credit reporting requirements per the CARES act, and a reduction in credit utilization may be driving improvements in credit scores nationally.37
• Indicator 7 – Adequate Insurance:  In August 2020, 52% of people in America said they were confident they would have sufficient insurance to manage an emergency, a significant decline from the 58% of people who reported this in 2019 and the 61% of people who reported this in 2018 (Figure 23). This indicator was the only one of the eight financial health indicators that declined between 2019 and 2020. Some of this decline may be due to a change in survey logic preceding the question used to measure this indicator.38 However, some of the decline may beexplained by a longer-term trend in declining rates of health insurance ownership
• Indicator 8 – Planning Ahead:  As of August 2020, 64% of people in America said their household plans ahead financially, a significant increase from the 59% of people who reported this in 2019 (Figure 24). While it may seem counterintuitive that more people are planning ahead during such a volatile time, it may be precisely the uncertainty of the current moment that makes planning so compelling.41 Without knowing when the next round of stimulus and relief measures will arrive, many people continued to keep their expenses low, even as states began to reopen their economies. Much of the decrease in spending has been driven by people with higher incomes (as we discuss on pg. 25), but people with lower incomes have attempted to reduce their expenses as well.42