Only 1 in 10 Americans (10.5%) check all the right boxes for financial health, according to a NerdWallet analysis of consumers surveyed on key measures such as retirement savings, emergency funds and protection against financial setbacks.
The March 2017 online survey, commissioned by NerdWallet and conducted by Harris Poll, asked more than 2,000 U.S. adults about eight important components of financial health. NerdWallet weighted the eight questions to produce a financial health score for each person surveyed. A financial health score of 100 would reflect:
- Money left over after paying critical bills and living expenses
- Three months or more of living expenses saved
- Confidence that retirement saving is on track
- All or most bills paid on time
- Credit card balances always or almost always paid in full each month
- Good to excellent credit score
- No debt or debt that does not disproportionately affect daily decision making
- Enough insurance coverage to protect against major financial loss
The average score among all participants in NerdWallet’s survey was 67.9 on a 100-point scale. (Take the financial health quiz.)
About 1 in 10 Americans (11%) say they spend more on monthly expenses than their household income allows, and about one-third (32%) say they just make ends meet. Thirty percent of Americans are not saving for retirement, and about one in five (19%) have nothing saved for emergency expenses.
“Spending less than you earn is the first essential step toward building financial health, but four out of 10 people aren’t able to manage even that,” says Liz Weston, NerdWallet columnist and certified financial planner. “Most people are struggling to save enough for current emergencies and for their future retirement.”
What is financial health?
Financial health means more than just having cash in the bank or an excellent credit score, though those are good indicators. NerdWallet considers financial health the ability to manage daily finances, save for the future and weather a financial shock. Of the eight financial traits we identified that result in financial security, the most important are:
- Spending less than you earn
- Having an emergency fund
- Actively saving for retirement
In scoring, the questions about those traits were most heavily weighted. About 12% of Americans scored top marks for all three measures: those who said they have money left over each month after paying household expenses; have savings that total at least three months of household expenses; and are saving enough to retire comfortably.
Where consumers are falling short
The survey also asked Americans about indicators of financial stress, such as late bill payments or burdensome debt, and factors that would help them weather a financial shock, such as adequate insurance and a good credit score.
Other elements of financial health that need improvement among Americans, according to results from the survey:
|Key measure||Notable result|
|Monthly expenses||11% of Americans say expenses exceed household income. 32% say they meet expenses with nothing left over.|
|Emergency funds||19% of Americans have no emergency funds at all. 14% have savings that could cover two weeks of living expenses or less.|
|Retirement savings||38% of those ages 45-54 are not currently saving for retirement.|
|Paying bills on time||11% of Americans say they pay few or none of their bills on time.
|Credit card use||16% of Americans say they never or almost never pay off monthly balances in full.|
|Credit scores||14% of Americans say their most recent credit score was below 630. Self-reported credit scores ranged as follows:
Good or excellent (690 or higher): 55%
Average or fair (630-689): 13%
Poor (629 or lower): 14%
|Debt burden||29% of Americans say their debt affects all or nearly all their decisions.
|Insurance policies||23% of Americans say they don't think they have enough coverage to protect them against major financial losses.|
Financial health: Women vs. men
Overall, women are less likely than men to report confidence in saving enough to be able to retire comfortably (16% vs. 29%) and more likely to say that they had no emergency savings (23% vs. 14%) and have living expenses that exceeded their monthly household income (14% vs. 9%).
Financial habits: women vs. menWomen reported weaker financial outlooks when it comes to savings and spending.
|Average financial health score||64.3||71.9|
|Not saving for retirement, ages 18-34||56%||33%|
|Have no emergency fund||23%||14%|
|Debt influences all or nearly all decision making||33%||24%|
|Monthly living expenses typically exceed income||14%||9%|
NerdWallet assigned each survey respondent a financial health score between zero and 100 based on their answers to eight questions. Those scores were then weighted to make them nationally representative. Maximum points assigned as follows: Money left over after paying critical bills and living expenses (20 points); three months or more of living expenses saved (15 points); confidence that retirement saving is on track (15 points); all or most bills paid on time (10 points); credit card balances always or almost always paid in full each month (10 points); good to excellent credit score (10 points); no debt or debt that does not disproportionately affect daily decision making (10 points); and enough insurance coverage to protect against major financial loss (10 points)
Financial Literacy Month
More than one-quarter of American households believe they have too much debt and say their finances cause them significant stress, according to a 2015 report by the Center for Financial Services Innovation, a nonprofit financial services consultancy.
National Financial Literacy Month, celebrated each April in the United States, aims to raise public awareness about financial education and the consequences of personal money mismanagement and misunderstanding.
In 2000, the Jump$tart Coalition for Personal Financial Literacy began promoting April as Financial Literacy for Youth Month, an expansion of the National Endowment for Financial Education’s Youth Financial Literacy Day. By March 2004, Resolution 316, passed by the Senate, marked April as National Financial Literacy Month. Then, in 2012, President Barack Obama issued a proclamation declaring April as National Financial Capability Month. This year, President Donald Trump reaffirmed the proclamation.
Participation in National Financial Literacy Month is nationwide and includes schools, nonprofit organizations, businesses and financial services institutions to promote financial education and wellness. This year, Jump$tart’s theme is creating a “financially literate future,” supported by the social media campaign #afinlitfuture.” Look online for #FLM2017 for more National Financial Literacy Month content and events.
In addition to the financial health calculator, NerdWallet’s financial literacy page offers day-by-day tips for boosting your financial health all through the month. We’ve also put together need-to-read articles on topics like savings basics, paying off debt, your credit score and more.
Anna Helhoski is a staff writer at NerdWallet, a personal finance website. Email: email@example.com. Twitter: @AnnaHelhoski. For complete survey methodology, including weighting variables, please contact Chris Pappas. Email: firstname.lastname@example.org.