‘Financial wellness’ has gained a lot of buzz in recent years, coinciding with mounting financial stressors from the COVID-19 pandemic. It’s one of those terms you may have heard, but aren’t certain what it actually entails.
If so, you’re not alone. There doesn’t appear to be one standardized industry definition, but rather more of a generalized understanding of what financial wellness means. It encompasses not just numbers in the bank or on the books, but also feelings of satisfaction, security and confidence, freedom, and capability when it comes to personal finances. The overarching idea is that financial wellness is a core component of someone’s overall well-being, on par with physical health, and with far-reaching implications – and that it needs to begin to be treated in that way.
So, what does financial wellness look like in the United States today? Any attempt to quantify financial wellness involves an in-depth look at many areas, such as income and investment behaviors, as well as sentiments, beliefs, and expectations. CivicScience regularly tracks changing feelings on personal well-being, financial outlook, and economic impact in a variety of different ways – such as via its ESI (Economic Sentiment Index), COVID Recovery and Consumer Spending Tracker, and Well-Being Index.
Pulling from different aspects of these and other survey data, we took a high-level look at the state of financial wellness today.
Declining Outlook On Personal Finances
In short, the outlook on personal finances among Americans has worsened. The boon to personal finances inadvertently created by the COVID-19 pandemic began to slide in 2021, as inflation took hold and stimulus payments dried up. Today, a growing number of U.S. adults (27%) say that they are worse off financially than they were before the pandemic, compared to 20% in April of last year. Even so, “boomflation” continues as people spend and prices rise.
How does that translate to feelings of financial security? In a recent survey of more than 2,700 U.S. adults, the majority (66%) report feeling at least somewhat secure in their current financial situation. More than one-third of respondents don’t feel secure, however.
Sources of Financial Stress
And of course, these sentiments are in a state of constant change. Today’s rising stress levels are connected to a host of issues, including inflation and supply chain problems, uncertainty over the future, and global unrest. The majority of Americans report feeling concerned about their personal finances due to the war in Ukraine.
Naturally, the heightened state of financial stress shakes out differently across the Gen Pop. A recent survey (n=2,884) looked broadly at several key areas impacting financial wellness: income/job security, debt level, credit, savings and investments, and affordability of basic living expenses.
Results show that people are most likely to feel stressed about affording basic living expenses and their savings and investments. More than one-quarter cite managing basic living expenses today as the biggest source of stress on them financially, followed by 19% who feel stressed about saving and investing and/or financially planning for the future.
Income and job security rank low on the list of financial stressors, but concerns vary based on annual income levels. Adults earning $50K or less per year are unsurprisingly more likely to say living expenses (groceries, gas, etc) are the biggest source of stress, whereas those earning $100K-$150K are twice as likely to cite saving/investments and planning for the future.
CivicScience data also show a general decline in feelings of comfort, satisfaction, and confidence in each of these areas over the past year. Compared to March 2021, Americans feel less comfortable with their debt, less satisfied with their income and credit score, less confident in their savings and investments, and more concerned with inflation and rising gas prices.
For example, 43% of people feel confident that they are saving enough today to live comfortably when they retire, down from 45% last March. And a growing number of people (25%) expect to have less money in investments six months from now.
Financial Literacy Improved, Sort Of
While these findings suggest a sense of decreasing self-perceived financial wellness during challenging times, the question then shifts to solutions people can use to help gain control of their financial situation, such as improving financial literacy.
CivicScience data show a mild increase in self-reported financial literacy across the board in the past three years. Today, 90% of people say they are at least somewhat financially literate, which hasn’t changed since 2019. However, today more people are likely to say they are “very” financially literate.
Interest In Financial Wellness Programs
Employers can also play a role in improving financial literacy and overall financial wellness. It’s estimated that businesses lose $250 billion annually due to employees who are distracted by their personal financial situation, providing incentive to include more robust financial wellness programs in benefits packages. These may not just include access to retirement funds and a financial advisor, but also educational programs, help with financial management and planning, and other kinds of tools.
Gauging public reception, a large percentage (71%) of employed adults said that they would be at least somewhat likely to take advantage of these kinds of programs if offered by their employer.
Personal Budgeting Apps Not Yet Widespread
Fintech apps may help people manage finances and improve feelings of financial wellness. Recent survey results show that adoption of personal budgeting apps such as Mint and Acorn has increased, although just a small percentage has used or intends to use these apps.
The picture that emerges of collective financial wellness today varies across the population – by income, age, and gender, for example – but it’s clear that economic stressors are bringing down averages. At the same time, there does appear to be growing interest in using financial tools, such as apps and employee programs, to improve feelings of financial wellness.