Only 1 in 10 Americans have mastered the basics of their personal finances

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According to a NerdWallet analysis of consumers surveyed on key metrics such as retirement savings, emergency funds and protection against financial setbacks, only 1 in 10 Americans (10.5%) tick all the right boxes for the financial health.

The March 2017 online survey, commissioned by NerdWallet and conducted by Harris Poll, asked more than 2,000 American adults about eight important things about financial health. NerdWallet weighted the eight questions to produce a financial health score for each respondent. A financial health score of 100 would reflect:

  1. Money left over after paying critical bills and living expenses

  2. Three or more months of living expenses saved

  3. Confidence that retirement savings are on the right track

  4. All or most invoices paid on time

  5. Credit card balances always or almost always paid in full each month

  6. Good to excellent credit rating

  7. No debt or debt that doesn’t disproportionately affect day-to-day decision making

  8. Sufficient insurance coverage to protect against major financial loss

The average score of all participants in the NerdWallet 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 a third (32%) say they are just making ends meet. Thirty percent of Americans aren’t saving for retirement, and about one in five (19%) haven’t saved anything for emergency spending.

“Spending less than what you earn is the essential first step in building financial health, but four in 10 people can’t even manage it,” says Liz Weston, NerdWallet columnist and certified financial planner. “Most people find it difficult to save enough for current emergencies and for their future retirement. “

What is financial health?

Financial health means more than just having money in the bank or a great credit rating, although these are good indicators. NerdWallet views financial health as the ability to manage day-to-day finances, save for the future, and overcome financial shock. Among the eight financial characteristics that we have identified that translate into financial security, the most important are:

  • Spend less than what you earn

  • Actively saving for retirement

When scoring, the questions on these traits were the most weighted. About 12% of Americans scored highest on all three measures: those who said they had 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 comfortably retire.

Where consumers lag behind

The survey also asked Americans about indicators of financial stress, such as late bill payments or heavy debt, and factors that would help them cope with a financial shock, such as adequate insurance and a good credit score. credit.

Other things to improve financial health among Americans, according to the survey results:

11% of Americans say expenses exceed household income. 32% say they meet their expenses with nothing more.

19% of Americans have no emergency funds. 14% have savings that could cover two weeks of living expenses or less.

38% of 45-54 year olds are not currently saving for retirement.

11% of Americans say they pay little or none of their bills on time.

16% of Americans say they never or almost never pay off their monthly balances in full.

14% of Americans say their most recent credit score was less than 630. Self-reported credit scores varied as follows: Good or excellent (690 or more): 55% Fair or fair (630-689): 13% Poor (629 or less): 14%

29% of Americans say their debt affects all or almost all of their decisions.

23% of Americans say they don’t think they have enough coverage to protect against major financial loss.

Financial health: women vs men

Overall, women are less likely than men to report having enough savings to be able to retire comfortably (16% vs. 29%) and more likely to say they had no savings in their retirement. emergency (23% vs. 14%) and have expenses that exceeded their monthly household income (14% vs. 9%).

Financial habits: women vs men

Average financial health score

Not saving for retirement, 18-34 years old

Debt influences all or almost all decisions

Monthly living expenses usually exceed income

NerdWallet assigned each survey respondent a financial health score between zero and 100 based on their responses to eight questions. These scores were then weighted to make them nationally representative. Maximum points awarded as follows: money remaining after paying critical bills and living expenses (20 points); three months or more of living expenses saved (15 points); confidence that retirement savings are on the right track (15 points); all or most invoices paid on time (10 points); always or almost always credit card balances paid in full each month (10 points); good to excellent credit rating (10 points); no debt or debt that does not disproportionately affect day-to-day decision-making (10 points); and sufficient insurance coverage to protect against major financial losses (10 points)

Financial Literacy Month

More than a quarter of U.S. households think they are too much in debt and say their finances are causing them significant stress, according to one 2015 report by the Center for Financial Services Innovation, a non-profit financial services consultancy.

National Financial Literacy Month, celebrated annually in April in the United States, aims to raise awareness about financial education and the consequences of mismanaging personal money and misunderstanding.

In 2000, the Jump $ tart Coalition for Personal Financial Literacy began promoting April as Financial Literacy Month for Youth, an extension of the National Endowment for Financial Education’s Youth Financial Literacy Day. In 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 national and includes schools, nonprofits, businesses and financial services institutions to promote financial education and wellness. This year, the theme of Jump $ tart is Creating a ‘Financial Literate Future’, supported by the #afinlitfuture social media campaign.

In addition to the Financial Health Calculator, NerdWallet’s financial literacy This page offers day-to-day tips to improve your financial health throughout the month. We’ve also rounded up some must-have articles on topics like Savings Basics, Debt Payoff, Your Credit Score, and more.

Follow NerdWallet on Facebook and Twitter for weekday tips to improve your financial health.

Anna Helhoski is a writer at NerdWallet, a personal finance website. E-mail: [email protected]. Twitter: @AnnaHelhoski. For a complete survey methodology, including weighting variables, please contact Chris Pappas. E-mail: [email protected].

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