Overall Economic Well-being
In monitoring the overall economy, it is valuable to track the financial well-being of individual families--including their own perceptions of how they are faring financially and how they feel that this has changed over time. The 2016 survey finds that individuals and their families generally showed continued improvement in their economic well-being relative to recent years. Nevertheless, three out of ten adults still say that they are struggling to get by or are just getting by financially. There also remains some evidence that recent economic advancement has been felt unevenly, as those with greater levels of education are the most likely to report an upward trajectory in their well-being.
Current Economic Circumstances
The survey asks respondents to provide a self-assessment of how they are currently managing financially. It does so by having respondents describe their current financial well-being, the recent trajectory in their well-being, and their well-being compared to their parents at a similar age (the last of which is discussed in box 1).
The share of adults who say that they are currently faring relatively well financially continued on a path of modest improvement in 2016.5 Twenty-nine percent of respondents in the 2016 survey report that they are living comfortably and 40 percent report that they are doing okay. This is the third consecutive year in which the fraction of adults who say that they are at least doing okay financially has increased (figure 1). However, the 1 percentage point improvement in 2016 is less than that observed between 2014 and 2015 and is not a statistically significant change relative to the 2015 results.6
Adults with a bachelor's degree or higher are by far the most likely to report that they are at least doing okay financially, with four out of five such individuals reporting they are doing okay or living comfortably. Those with more education also drove the observed gains in overall well-being in 2016. While the share of adults with some college, an associate degree, or a bachelor's degree who feel that they are doing okay financially increased slightly in 2016, the share of adults with a high school degree or less who feel they are at least doing okay financially had a small decline.
Additionally, despite the modest improvements in financial well-being in 2016, three out of ten adults still report that they are either finding it difficult to get by (9 percent) or are just getting by (21 percent) financially. This represents approximately 73 million adults who are struggling to some degree to get by. The likelihood of experiencing this level of financial stress is also not uniform in the population, with single parents, racial and ethnic minorities, and respondents with lower levels of income or education being disproportionately likely to report that they are having some level of difficulty getting by financially (table 2).7 There are not, however, substantial differences across urban and rural respondents or across regions of the country.8
Table 2. Overall well-being (by demographic characteristics)
|Characteristic||Finding it difficult to get by or just getting by||Doing okay or living comfortably|
|Less than $40,000||49.0||51.0|
|Greater than $100,000||7.6||92.2|
|Marital and parental status|
|Unmarried, no children under 18||37.5||62.5|
|Married, no children under 18||20.2||79.7|
|Unmarried, children under 18||45.5||54.5|
|Married, children under 18||27.3||72.3|
Considering overall financial well-being by education along with race and ethnicity simultaneously, it also appears that there are differences within education groups.9 Among adults with a high school degree or less, 62 percent of white adults and 58 percent of both black and Hispanic adults are doing okay or living comfortably. This 4 percentage point gap is not statistically significant, although larger and statistically significant differences emerge among those with more education.10 Considering adults with at least a bachelor's degree, 85 percent of whites report that they are doing okay or living comfortably. This compares to 73 percent of blacks and 77 percent of Hispanics with this level of education who are at least doing okay financially (figure 2).
The survey also tracks overall economic well-being through the alternate approach of asking respondents whether they are better off now financially than they were 12 months ago. Measuring well-being in this way is important for tracking economic trajectories, as some individuals may feel that their financial well-being is improving even if they are still struggling overall (or that they are worse off than they were a year earlier even if they are doing well overall).
Considering the population as a whole, individuals are more likely to say that their financial well-being has improved over the prior year than to say that it has declined (table 3). However, responses to this question also differ based on the education of the individual as well as by their race and ethnicity. Following the same pattern as that observed in 2015, respondents with less education are the least likely to feel that their economic well-being improved in 2016. While adults with a bachelor's degree are 16 percentage points more likely to report that their well-being improved during the year than to say that it declined, those with a high school degree or less are 3 percentage points more likely to say that it improved during this time.
Table 3. Compared to 12 months ago, would you say that you are better off, the same, or worse off financially? (by education and race/ethnicity)
|Education level||Somewhat or much worse off||The same||Somewhat or much better off||Better off minus worse off|
|High school degree or less|
|Some college or associate degree|
|Bachelor's degree or more|
Furthermore, white respondents with no education beyond high school are particularly disinclined to report that their financial well-being has improved in the year prior to the survey. A slightly larger share of whites with a high school degree or less indicate that their well-being declined over the prior year (21 percent) than say that their well-being improved (20 percent). This result is not observed among black and Hispanic adults with the same level of education. Box 2 provides additional analysis of the recent trends in well-being by these groups.
Box 1. Intergenerational Trends in Financial Well-Being
One way to gauge individuals' financial progress is to compare how they are faring financially relative to their parents. When asked whether they have advanced financially compared to their parents at a similar age, a majority of adults say that they have. Fifty-three percent feel that they are somewhat or much better off than their parents were at the same age, compared to 22 percent who feel that they are worse off (table A). Additionally, the assessment of economic progress compared to one's parents is largely consistent across all generations of adults.
Table A. Financial well-being relative to parents when they were the same age (by age)
|Age||Better off||About the same||Worse off|
Perceptions of intergenerational financial progress vary by race and ethnicity. Black and Hispanic adults are more likely to indicate that they are better off than their parents than are white adults. While 51 percent of white adults report that they are better off than their parents, 60 percent of black adults and 56 percent of Hispanic adults report the same. How-ever, this may reflect the different starting points from which these individuals are comparing. Respondents are asked how much they worried as a child about their family's finances, having enough food to eat, crime and their own personal safety, and having a stable caregiver. Across each of these dimensions, black and Hispanic adults are more likely to report that these issues were a concern to them growing up. This is true both for the population as a whole and for the youngest cohorts for whom childhood recall may be most accurate (table B). As a result, this also reflects that, for some black and Hispanic individuals, the financial threshold to be better off than one's parents is lower.
Table B. Adults who sometimes or regularly worried about financial topics when growing up (by age and race/ethnicity)
|Characteristic||Family's finances||Having enough food||Crime and personal safety||Having a stable caregiver|
Box 2. Recent Trends in Well-Being over Time by Demographic Group
The SHED has tracked multiple measures of financial well-being over the past several years, including self-assessed overall well-being, preparedness for a $400 emergency, forgoing medical treatments due to cost, having saved money in the last year (income exceeds spending), and having a bank or credit union account. In general, when considering these measures that have been tracked over time, the overall financial picture of U.S. households has improved, although not always to the same degree among those of different demographic groups. Table A considers the recent trajectories for trends across well-being measures by demographic characteristics, relative to those observed in 2014, when similar questions were asked in the survey.
Table A. Change in financial well-being measures from 2014 to 2016 (by demographic characteristics)
|Characteristic||Measure (percentage change)|
|Doing okay or living comfortably||Would pay $400 expense using cash or its functional equivalent||Missed medical care due to cost||Income exceeds spending||Has bank or credit union account|
|High school degree or less||3.0||-0.3||-5.0||4.3||0.8|
|Some college or associate degree||6.8||2.6||-5.5||4.4||0.4|
|Bachelor's degree or more||5.5||5.8||-8.4||7.4||0.7|
A clear pattern over the past two years across these measures is that the improvements have been most pronounced among those with greater levels of education. The share of bachelor's degree recipients who are doing okay financially or who have saved at least some of their income has increased over this period by more than that observed for those with a high school degree or less. The share who have missed medical treatment has similarly declined most rapidly among respondents with the most education. The exception to this pattern is bank account access--although the share of respondents with a bachelor's degree who had a bank or credit union account was already over 97 percent in 2014, so there was limited room for further improvement.
An additional pattern is that despite generally reporting lower levels of financial well-being, black and Hispanic adults in the survey demonstrate greater recent improvements in their well-being over this period than is observed among whites. This is true both when considering the share who feel that they are doing at least okay overall financially, as well as when considering several of the other more specific financial measures that may factor into individuals' overall well-being.
Although the magnitudes of recent improvements differ both across levels of education and across races and ethnicities, the implications of these divergent trajectories on current gaps in well-being are different. For the differences across education levels, since those in the strongest financial position are also those for whom financial well-being is improving most rapidly, the recent trajectory has served to expand the education gap in financial well-being. When considering the more rapid improvements seen among blacks and Hispanics than among whites, this has reduced the gap in well-being that exists across these groups. As discussed further in the main text of the report, despite recent improvements, black and Hispanic individuals still exhibit greater financial challenges across each of these measures than do white respondents in the survey.
Self-Assessed Financial Challenges
The survey further explores the overall financial well-being of families by posing an open-ended question that focuses on the financial challenges that respondents currently face. Respondents are asked either to check a box indicating that they face no financial challenges or provide a written response to the request, "In a couple of words (150 character max), please describe the main financial challenges or concerns facing you or your family." Forty-six percent of respondents (unweighted) checked the box, while most of the remaining 54 percent provided some response to the open-ended request.11 The content in these responses is then coded based on terms mentioned in order to identify broad themes under which the financial challenges can be grouped.12
Lower-income respondents are less likely to say that they currently have no financial challenges, with 41 percent of those whose income is less than $40,000 doing so, compared to approximately half of those with higher incomes indicating that they have no challenges. The types of challenges reported by those who have them also differ greatly by income. Short-term challenges, such as rent, food, gas, utilities, and other bills, are reported as a financial challenge most frequently by respondents whose family income is less than $40,000 per year. Similarly, while a number of respondents in all income groups discuss employment concerns, these too are most common among lower-income respondents. In contrast, concerns relating to retirement or education are each most prevalent among respondents in the upper-income group (figure 3). The correlation between retirement concerns and income is, in part, related to the higher average age of upper-income respondents. Nevertheless, even within age bands, it remains true that higher-income individuals are more likely to mention concerns about retirement and less likely to mention concerns about short-term challenges.
There are similar differences in the types of challenges cited across the race and ethnicity of respondents. While 17 percent of white respondents who describe their concerns reference a short-term financial challenge, among black and Hispanic respondents 30 percent and 27 percent do so, respectively. Conversely, while 18 percent of white respondents who provide a concern discuss retirement, 5 percent of black respondents and 9 percent of Hispanic respondents describe a retirement-related concern.
The difference in the array of financial concerns can be seen visually in the word clouds in figure 4. Each word cloud includes the 75 most frequently observed words in the description of individuals' challenges, with the size of the word reflecting its frequency. The word clouds closely mirror the observations regarding major challenges by income group that could be ascertained from figure 3. Among lower-income respondents, "money" and "bills" are the most commonly reported words. In contrast, "retirement" is the most dominant word to appear in the self-reported financial challenges of higher-income respondents. This provides some additional evidence that higher-income individuals are concerned about their long-run financial health, whereas those lower in the income distribution may be unable to focus on these long-run concerns as they struggle to meet their short-term financial obligations.
5. All references in this report to time periods in questions are based on the survey's field date in October 2016. Hence, references to the past year or prior year refer to the period from November 2015 through October 2016. References to the past month refer to September 2016 through October 2016, and references to current well-being or the current month refer to October 2016. Return to text
6. References to statistical significance throughout this report are based on the 90 percent confidence level. Results for 2013 may deviate slightly from those presented in the Report on the Economic Well-Being of U.S. Households in 2013 (www.federalreserve.gov/consumerscommunities/shed_publications.htm). This reflects a change in weighting criteria in 2014 that included income brackets when weighting respondents to match the U.S. population. To ensure that any changes since 2013 reflect actual trends rather than methodological differences, the 2013 data were re-weighted using the same weighting criteria as subsequent surveys for the purposes of comparisons within this report. Return to text
7. As is discussed in more detail in the "Income and Savings" section of this report, income is measured in this report as the income of the respondent and his or her spouse or partner. This may differ from the total income received by all members of the household. Return to text
8. Urban areas are defined throughout this report as being within a Metropolitan Statistical Area (MSA) and rural areas are those outside of MSAs. Return to text
9. All references in this report to white respondents include only non-Hispanic white respondents. Similarly, references to black respondents include only non-Hispanic black respondents. Hispanic respondents are presented separately, and include Hispanic respondents of any race. Return to text
10. Recognizing that self-perceptions of well-being may rely both on one's absolute level of well-being and the well-being of one's reference group, the lack of a statistically significant difference among those with a high school degree or less may in part reflect differences in the subjective scale used to report one's well-being. In latter sections of this report, evidence emerges that, on several absolute measures of well-being, black and Hispanic respondents with a high school degree or less are experiencing greater levels of financial hardship. Return to text
11. Twelve percent of respondents provided no response to the open-ended question and did not check the box indicating that they had no challenges. This group may include some people who had no concerns and others who simply chose not to provide an answer. Return to text
12. Sentences in which the respondent mentions any of the terms retire, pension, old age, Medicare, SSI, IRA, 401(k), or Social Security were grouped into the "retirement" theme; those that mentioned student loan, college, school, education, tuition, degree, university, or student were grouped into the "education" theme; those mentioning job, employment, employ, laid off, part time, hours, full time, overtime, cutback, skills, salary, wage, or work were grouped into the "jobs" theme; those mentioning food, gas, bills, utilities, rent, or mortgage, or car were grouped into the "short-term concerns" theme; those mentioning medical, medicine, health, health care, insurance, Obamacare, Medicaid, and Medicare were grouped into the "medical" theme; and those mentioning credit card, loan, debt, or owe were grouped into the "debt" theme. Responses can be included in multiple themes, or no themes, as the categories are neither exhaustive nor mutually exclusive. All results based on the text analysis of responses are unweighted. Return to text