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Here’s what Americans really think about their financial outlook

Are you making enough progress at saving? Do you have a pathway to get out of debt? Are you setting yourself up for a comfortable retirement? Are you making the right decisions to shape the financial future you hope to enjoy?

Most of us struggle at one time or another with those kinds of questions, and you may wonder how your spending and saving habits stack up against others’.

A new report on financial capability offers an in-depth look at how Americans are handling their personal finances. The results reveal that many Americans are feeling less financial stress than just a few years ago-but there are still areas in which we could all be doing better.

In July, the Investor Education Foundation of the Financial Industry Regulatory Authority (FINRA), an independent, not-for-profit regulatory body authorized by Congress to oversee the financial industry, published its 2016 report, “Financial Capability in the United States.”

The report offers a comprehensive overview of how Americans handle their finances, based on extensive surveys of more than 27,000 adults who answered questions about savings, investment, debt, knowledge about financial products and more.

What is ‘financial capability’

The National Bureau of Economic Research defines “financial capability” as a measurement of “how well people make ends meet, plan ahead, choose and manage financial products, and possess the skills and knowledge to make financial decisions.”

As the FINRA foundation study notes:

Financial capability cannot be measured simply by looking at one indicator, such as demonstrated knowledge of specific terms or concepts. Instead, financial capability encompasses multiple aspects of behavior relating to how individuals manage their resources and how they make financial decisions (including the factors they consider and the skill sets they use). It is a multi-dimensional concept that requires looking at individual behavior from various angles.

So “financial capability” is a more comprehensive concept than “financial literacy,” since it strives to capture not simply how much people know about financial matters and products, but also how they apply that knowledge in their own financial decision-making.

What Americans really think about their finances

The 2016 survey reveals a number of bright spots in Americans’ financial capability, including a general feeling among many respondents that their financial picture is improving. At the same time, there are warning signs among some populations that we should heed.

A few key takeaways from the study:

  • Making Ends Meet. With the U.S. economy growing modestly and unemployment declining steadily from their peak in 2009, nearly half of Americans (48%) report no difficulty in covering their monthly expenses and bills, an improvement from 2009 (36%). In addition, satisfaction with one’s personal financial condition (31%) has also seen significant improvement in comparison to 2009 (16%).
  • More Americans are saving, but we could be doing better. About 40% of Americans report that they spend less than their income each year, which means that nearly 60% are spending their entire income, or more, each year-making it virtually impossible for them to achieve lasting financial security.
  • Ready access to emergency funds reduces financial fragility. If you needed $2,000 to pay for an unanticipated expense in the next month, how confident are you that you could come up with the money? According to 62% of survey respondents, they “probably” or “certainly” come up with the needed funds-again, an improvement over 56% in 2012.
  • Americans are investing for the future, but many worry it may not be enough. About 58% of Americans now have a retirement account (employer-based or individual), the report finds, which is a slight increase from 54% four years ago. But at the same time, significant numbers of Americans in every age group and at all income levels report anxiety over having enough money for retirement. Also, relatively fewer Americans-only about 30% -report having investments in stocks, bonds, mutual funds or other securities outside their retirement accounts.
  • Medical expenses are often a significant stressor on household budgets. While more Americans have access to health insurance today, large numbers still report struggling with medical bills. About 21% say they have unpaid medical debt (down from 26% in 2012), and 28% say they have avoided or postponed seeking a medical service (like visiting a doctor, following through with doctors’ recommendations or filling a prescription) due to concerns over the cost.
  • Student loan debt is holding many Americans back. While many students, 26% of American adults, borrow to finance college education (Americans hold an estimated $1.3 trillion in outstanding student loan debt), the growth of the debt burden has put a strain on many budgets, particularly among younger borrowers.
  • But less overall debt means more breathing room. Looking beyond student loan burdens, the study does find evidence that Americans may be handling debt more effectively than in the past. For the first time, more than half of credit card users say they pay off their balance each month, and significantly fewer Americans reported being “underwater” on their mortgages (i.e., owing more on their mortgage than their home is worth) than in 2012.
  • Financial education is lacking. Survey respondents were asked if they had opportunities for financial literacy education in school, in college or at their workplace. Sixty percent said that they had no such opportunity-which suggests that the nation needs to do a better job of providing financial literacy education.
  • The benefits of financial capability are not evenly distributed. Younger Americans; minorities; those without a college education; and households making less than $25,000 per year are at a disadvantage, particularly when it comes to key financial goals like home ownership, planning for retirement and achieving financial security.

The survey results are a reminder of the importance of developing sound financial knowledge and habits, and it’s worth glancing through the results to test your own knowledge and performance-and to look for ways that you can improve your financial capability. (For state by state breakdowns of the results, visit the FINRA Investor Education website.)


Curious about how your own financial knowledge stacks up? The FINRA Investor Education Foundation offers a quick five-question financial literacy quiz that will test your knowledge of key concepts like compound interest, mortgages, and stock and bond investing.Take the quiz to see how you do!