A recent study conducted by the Center for Financial Services Innovation (CFSI) has revealed the ugly truth about just how much people all around the United States are suffering from financial woes. It might be easy to think that the only people having hard financial times are the homeless, or even the extremely poor. The truth that this study revealed, however, is that a whopping 57 percent of American adults are dealing with very real financial difficulties. The study was performed in order to get a current “health check” on the financial state of affairs for people in America. The hope is that by understanding the current situation, steps can be taken to help improve financial outcomes for households in the U.S. Different demographic groups face various financial challenges, but the end goal that everyone needs to get behind is finding a way to help everyone improve their financial outcomes, if possible.
In response to the recent study, Aliza Gutman, the director of the CFSI and leader of the study, had some interesting insights to share in a recent interview. Gutman is in a unique position of being able to interpret the data that was used in the study and making it easy to understand for anyone interested in this topic.
When asked about the significance of the study, and how it differs from previous, related studies Gutman said, “The Consumer Financial Health Study consists of a nationwide survey and consumer segmentation. We surveyed over 7,000 adults from across the United States and across the income spectrum, asking about financial behaviors, attitudes, preferences and product use. Consumers with annual incomes under $50,000 were over-sampled to provide a robust set of data on consumers in the lower half of the income distribution. However, since we aimed to understand the financial health of the entire country, we weighted the data back to the total U.S. population to report findings that are nationally representative.”
There are seven consumer segments that were identified by the study. These seven segments were put into one of three categories: healthy, coping and vulnerable. The healthy segments seem to do well financially. These folks are able to easily manage their finances and have a financial safety net in place to protect them in case of a financial emergency. They are in a good position to take advantage of financial opportunities and are responsible with their credit cards, savings accounts and checking accounts.
The people in the coping segments are more likely to deal with daily financial struggles and don’t usually have the financial cushion in place that their healthy counterparts do. This means that they are more likely to face more serious issues if a financial emergency were to take place. It seems, from the data collected, that the financially coping adults seem to lack the planning skills and habits that people who are more financially healthy exhibit.
Finally, it is crucial to understand the challenges the people in the vulnerable segments face. Often, these folks have no emergency funds in place; they are simply not prepared at all to face financial emergencies. They are the least likely to have credit cards, and the most likely to be underserved or unserved by the mainstream banks. Along with the at risk segments, the vulnerable group is the most likely to face serious financial repercussions from even the most seemingly benign and insignificant of financial difficulties.
With the understanding of the information that this study has put in place, it is important for financial experts and service providers to take measures to help equip the people who are financially struggling to become more financially healthy and able to contend with financial emergencies when they do occur.
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