Board of Governors of the Federal Reserve System

Executive Summary

In order to monitor the economic status of American consumers, the Federal Reserve Board conducted the fourth annual Survey of Household Economics and Decisionmaking in October 2016. This survey provides insights into the well-being of U.S. households and consumers, and provides important information about how individuals and their families are faring in the economy. Topics examined in the survey include individuals' overall financial well-being, employment experiences, income and savings behaviors, economic preparedness, access to banking and credit, housing and living arrangement decisions, education and human capital, student loans, and retirement planning.

Key findings from the survey across these areas of individuals' financial lives include:

Overall Financial Well-Being

Overall, the modest improvements in financial well-being that were observed in recent years continued into 2016. However, those with more education appear to have driven most of the observed gains in well-being relative to the previous year.

• Seventy percent of adults report that they are either living comfortably or doing okay financially, compared to 69 percent in 2015 and 62 percent when the question was first asked in 2013. However, 30 percent, or approximately 73 million adults, are either finding it difficult to get by or are just getting by financially.
• Forty percent of adults with a high school degree or less report that they are struggling financially, compared to 17 percent of those with at least a bachelor's degree.
• Non-Hispanic white adults with a high school degree or less are somewhat less likely than those of other races and ethnicities or those with more education to report that their financial well-being improved in 2016.

Employment, Multiple Jobs, and Informal Work

Employment conditions, including work scheduling and employee benefits, vary across the workforce. In addition to earnings from formal jobs, a sizeable minority of adults earn money through other informal activities.

• Seventeen percent of workers have a schedule that varies based on their employer's needs, and just over half of those with a varying work schedule are usually assigned their schedule three days in advance or less.
• Seventy-six percent of full-time workers are offered paid sick leave, compared to 27 percent of part-time workers and 8 percent of contract workers who are offered this benefit.
• In addition to any formal employment they may have, 28 percent of all adults report that their family earned money from informal income-generating activities in the month before the survey.

Income and Savings

Income volatility remains a concern for individuals, especially those with less education and among racial and ethnic minorities.

• Thirty-two percent of adults say that their income varies to some degree from month to month, and 13 percent struggle to pay bills in some months due to income volatility.
• Forty-seven percent of adults report that their income exceeded their spending in the prior year.

Economic Preparedness and Emergency Savings

Compared to previous years, fewer adults are ill-prepared for a modest financial disruption, although substantial shares of adults are struggling with their regular expenses or would struggle to cope with an unexpected hardship.

• Just under one-fourth of adults are not able to pay all of their current month's bills in full.
• Forty-four percent of adults say they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money, which has continued to improve from the 50 percent who were ill-prepared for this magnitude of expense when first asked in 2013.
• Twenty-three percent of adults had to pay a major unexpected out-of-pocket medical expense in the prior year, and one-fourth report forgoing one or more type of health care in the prior year due to affordability.
• Approximately 24 million people, representing 10 percent of adults, are carrying debt from medical expenses that they had to pay out of pocket in the previous year.

Banking and Credit

Most Americans are confident in their ability to obtain credit. Slightly over half of adults with a credit card report that they do not currently have a balance on their cards.

• Twenty-six percent of all adults and 54 percent of non-Hispanic black adults are either unbanked or underbanked.
• Over three-fourths of respondents are somewhat or very confident in their ability to obtain a credit card were they to apply for one.
• Forty-six percent of adults with a credit card report that they are carrying credit card debt, and 55 percent carried a balance at least once in the prior year.

Housing and Living Arrangements

Challenges exist for some renters, including the threat of eviction and difficulties working with their landlord.

• Nine percent of renters who moved in the previous two years did so because they were evicted or faced the threat of eviction.
• Forty-four percent of Hispanic renters and 42 percent of non-Hispanic black renters who contacted their landlord about a repair had moderate or severe difficulties getting it fixed, compared to 28 percent of non-Hispanic white renters who experienced this level of difficulty.

Higher Education

Individuals from lower socioeconomic backgrounds are less likely to attend college and, if they do, are more likely to attend for-profit institutions. Non-completers and attendees of for-profit institutions are less likely to feel that their education was worth the financial cost.

• Sixteen percent of young adults who were first-generation college students attended a for-profit institution, compared to 4 percent of college attendees with a parent who has a bachelor's degree.
• Nearly half of adults who attended a for-profit institution say that they would attend a different school if they could make their educational decisions again.

Education Debt and Student Loans

Debt for higher education is prevalent, as over half of adults under age 30 who attended college took on at least some debt while pursuing their education. The likelihood of falling behind on student loan payments varies depending on the type of institution attended and the level of education completed.

• One-third of borrowers with some college, a certificate, or a technical degree are behind on their education debt payments, compared to 11 percent of borrowers with a bachelor's degree who are behind.
• Nineteen percent of adults with debt from their own education report that someone else--such as a parent--is helping them with these debt payments.

Retirement

A continued challenge that was also seen in earlier years is that many individuals report having no retirement savings, and--among those who are saving--over half lack comfort in their ability to manage their retirement investments.

• Fifty-three percent of adults with self-directed retirement accounts are either not comfortable or only slightly comfortable in their ability to make the right investment decisions.
• Forty percent of black retirees and 50 percent of Hispanic retirees indicate that poor health contributed to their decision about when to retire, compared to 26 percent of non-Hispanic white retirees for whom this was a factor.