Defining Financial Well-Being

Consumer Financial Protection Bureau examines consumers’ financial experiences by state and their age-range; and the need for resources to improve their financial well-being.

11/22/2019 12:00 AM

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Defining Financial Well-Being

Financial well-being varies by age and where consumers live and recent research from the Consumer Financial Protection Bureau shows on average adults ages 18 to 61 have a score reflecting minimal savings and some difficulty making ends meet, according to the report “Financial Well-Being by State.”

The report specifically analyzes and compares financial well-being score patterns for adults ages 18 to 61 and adults ages 62 and older and is based on a 2016 survey of 6,394 adults in the U.S.

According to the CFPB, financial well-being is defined as the state wherein an individual has a sense of:

  • Control over day-to-day and month-to-month finances;
  • Capacity to absorb a financial shock;
  • Being on track to meet financial goals;
  • And the ability to make financial choices to enjoy life.

Looking at the financial well-being for younger and middle-age adults (ages 18 to 61), the CFPB found the average score was 49 in 2018, which is three points lower than the average for all adults in the U.S.

By state, the average scores for adults ages 18 to 61 range from 46 to 52.

A score of 49 is at the top of the medium-low financial well-being score range, which includes:

  • Most (60%) of adults in this range have minimal savings of $250 or more, but only 30% have $2,000 or more in savings.
  • Almost all of adults in this range (80%) find it somewhat or very difficult to make ends meet.
  • Some (32%) have had a credit card application rejected or are concerned about credit rejection.

Adults ages 62 and older, however, tend to have a higher average financial well-being score. The average score for this group was 62 in 2018, which is 10 points higher than the average for all adults in the U.S.

A financial well-being score of 62 is in the high range, meaning most adults in this group (81%) are certain they could come up with $2,000 for an emergency; 35% always stay on budget; and very few (6%) have experienced a credit rejection or are concerned about credit rejection.

Looking at individual states, the CFPB found that the number of adults with financial well-being scores in the low and very low categories varies notably.

In the very low category, (a score of 0-29) just 5% of adults in that group are certain they could come up with $2,000 for an emergency; while most (82%) sometimes or often experience “food insecurity” or “food hardship,” according to the CFPB.

In the low category (a score of 30-37); few (23%) save money on a regular basis and only some (38%) have more than $250 in liquid savings. Nearly half (45%) of adults in this group said they have experience with debt collectors.

The CFPB’s research also shows however, that adults with low and very low financial well-being scores and experiencing financial hardships may not be considered as “living in poverty” based on the traditional federal poverty line measure in the U.S., and vice versa.

“Such discrepancy is expected, because financial well-being is conceptually a different and more comprehensive measure than income,” according to the CFPB. “The traditional measure of poverty in the U.S. is based on the amount of income needed to cover basic needs. People who fall below this amount, also known as the poverty threshold, are considered to live in poverty.”

For example, in Alabama 21.4% of the state’s population has low or very low financial well-being scores, compared to 15.6 % of the population that has income under 100 % of the federal poverty line.

In Iowa, 19.9% of the state’s population has low or very low financial well-being scores, compared to 8.2% of the population that has income under 100 % of the federal poverty line.

In California, 12.8% of the state’s population has low of very low financial well-being scores, compared to 12 % of the population that has income under 100 % of the federal poverty line.

The CFPB’s findings can be a benchmark for the accounts receivable management industry to consider when communicating with consumers and developing manageable payment plans.

Visit the ACA Cast archives webpage for episodes tailored toward communicating with consumers and guidance on the Fair Debt Collection Practices Act.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

Defining Financial Well-Being

Financial well-being varies by age and where consumers live and recent research from the Consumer Financial Protection Bureau shows on average adults ages 18 to 61 have a score reflecting minimal savings and some difficulty making ends meet, according to the report “Financial Well-Being by State.”

The report specifically analyzes and compares financial well-being score patterns for adults ages 18 to 61 and adults ages 62 and older and is based on a 2016 survey of 6,394 adults in the U.S.

According to the CFPB, financial well-being is defined as the state wherein an individual has a sense of:

  • Control over day-to-day and month-to-month finances;
  • Capacity to absorb a financial shock;
  • Being on track to meet financial goals;
  • And the ability to make financial choices to enjoy life.

Looking at the financial well-being for younger and middle-age adults (ages 18 to 61), the CFPB found the average score was 49 in 2018, which is three points lower than the average for all adults in the U.S.

By state, the average scores for adults ages 18 to 61 range from 46 to 52.

A score of 49 is at the top of the medium-low financial well-being score range, which includes:

  • Most (60%) of adults in this range have minimal savings of $250 or more, but only 30% have $2,000 or more in savings.
  • Almost all of adults in this range (80%) find it somewhat or very difficult to make ends meet.
  • Some (32%) have had a credit card application rejected or are concerned about credit rejection.

Adults ages 62 and older, however, tend to have a higher average financial well-being score. The average score for this group was 62 in 2018, which is 10 points higher than the average for all adults in the U.S.

A financial well-being score of 62 is in the high range, meaning most adults in this group (81%) are certain they could come up with $2,000 for an emergency; 35% always stay on budget; and very few (6%) have experienced a credit rejection or are concerned about credit rejection.

Looking at individual states, the CFPB found that the number of adults with financial well-being scores in the low and very low categories varies notably.

In the very low category, (a score of 0-29) just 5% of adults in that group are certain they could come up with $2,000 for an emergency; while most (82%) sometimes or often experience “food insecurity” or “food hardship,” according to the CFPB.

In the low category (a score of 30-37); few (23%) save money on a regular basis and only some (38%) have more than $250 in liquid savings. Nearly half (45%) of adults in this group said they have experience with debt collectors.

The CFPB’s research also shows however, that adults with low and very low financial well-being scores and experiencing financial hardships may not be considered as “living in poverty” based on the traditional federal poverty line measure in the U.S., and vice versa.

“Such discrepancy is expected, because financial well-being is conceptually a different and more comprehensive measure than income,” according to the CFPB. “The traditional measure of poverty in the U.S. is based on the amount of income needed to cover basic needs. People who fall below this amount, also known as the poverty threshold, are considered to live in poverty.”

For example, in Alabama 21.4% of the state’s population has low or very low financial well-being scores, compared to 15.6 % of the population that has income under 100 % of the federal poverty line.

In Iowa, 19.9% of the state’s population has low or very low financial well-being scores, compared to 8.2% of the population that has income under 100 % of the federal poverty line.

In California, 12.8% of the state’s population has low of very low financial well-being scores, compared to 12 % of the population that has income under 100 % of the federal poverty line.

The CFPB’s findings can be a benchmark for the accounts receivable management industry to consider when communicating with consumers and developing manageable payment plans.

Visit the ACA Cast archives webpage for episodes tailored toward communicating with consumers and guidance on the Fair Debt Collection Practices Act.


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

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