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FINRA Study Says (Some) Americans’ Financial Health Improving

American consumers say they are having an easier time paying bills and are feeling much less stress over their financial situation than they were in 2009… unless they happen to be a Millennial, a woman, Hispanic, African-American, or less-than-college educated.

The 2015 National Financial Capability Study (NFCS) released by the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation says the recovery of the U.S. economy over the last six years hasn’t paid off for people in those categories.

The NFCS study asked 27,000 Americans to evaluate their financial health in four major areas: making ends meet; planning ahead; managing financial products; and financial knowledge and decision making. Women, minorities and those less educated finished at the lowest end of the scale for nearly every category.

“People are finding it easier to pay bills, more people are paying off credit cards every month and we’ve seen a big jump in emergency savings, which are all encouraging, positive behaviors from the people in our study,” Gary Mottola, research director at FINRA Investor Education Foundation, said.

“Unfortunately, not all demographic groups are benefitting. Women, African-Americans, Hispanics and low-income groups are still struggling.”

FINRA developed the Financial Capability study in 2009 and has conducted it every three years since then to help policy makers understand how consumers view their financial health. The 2015 results are loaded with interesting nuggets about spending, saving and debt, but nearly every bit of “good news” has a “bad news” angle to it, depending on how you read the results.

For example, the survey reveals these positive trends:

  • Satisfaction with personal financial condition has nearly doubled in the last six years (from 16% to 31%).
  • 46% of consumers say they have 3 months worth of emergency funds compared to just 35% in 2009.
  • The number of people paying off credit card debt every month is up to 52%, a jump of 11% from 2009.

Those survey results could just as easily be read to say:

  • 69% of consumers are not satisfied with their personal financial condition.
  • More than half of American consumers (54%) don’t have 3 months worth of emergency funds.
  • Almost half of credit card holders (48%) carry a balance forward from one month to the next.

“One of the things to consider when looking at the survey results is that we started from a pretty low base,” added Annamaria Lusardi, a professor at George Washington University and one of the authors of the study. “There wasn’t a lot to cheer about in 2009 when we did the first survey. That was a really sad time financially for most people.

“It takes a while for things to recover and we are starting to see evidence of that now. The worst days are behind us, but there definitely are areas where we have a lot of room for improvement.”

Some of the more encouraging news from the survey was that 60% of Americans said they had good or very good credit; the same number said they do not have too much debt; 58% said they had retirement accounts; and 81% gave themselves a positive or very positive grade on dealing with day-to-day matters such as checking accounts, credit and debit cards, and tracking expenses.

The three areas that raise the most concern are credit cards, student loans and financial literacy.

More than half (56%) of credit card users engage in what the survey authors consider “expensive” behaviors. These include: making the minimum monthly payment; paying late fees; paying over the limit fees or using the card for cash advances.

“Overall, you could say that debt management has improved, but we still see too many people engaged in these expensive behaviors,” Lusardi said. “This causes their interest rates on the credit cards to rise and the same thing happens when they go for mortgage or auto loans. Life suddenly becomes very difficult when you’re paying high interest rates for everything.”

Student loans are an area where almost nothing good is happening, starting with the fact that 37% have been late with a payment at least once in the past year and 25% were late more than once.

According to the survey, 26% of Americans 18-and-older have student loan debt and most of them didn’t know what they were getting into when they accepted the loan. The survey said that 54% didn’t bother asking how much monthly payments would be and only 29% said they would take out loans if given the chance to do it all over.

The more astonishing news, according to Mottola, was the 18% of those surveyed said they couldn’t answer whether they would or would not take a loan, if given another chance.

“That means that nearly one in five people who have graduated from college and are paying back student loans, still don’t know enough about the subject to answer whether they would do something different,” Mottola said.  “That’s alarming.”

It goes along with the distressingly low level of financial literacy among adults in the U.S.  The survey included a five-question test on interest rates, inflation, bonds, mortgages and risk. Only 37% of respondents were able to answer four out of five questions correctly.

That’s the lowest figure since the survey was first administered in 2009.

“I think overall satisfaction with finances is up,” Lusardi said. “People are doing better, but they are not doing as well as we would want them to be, especially young adults.

“They are starting economic life in debt from student loans, they’re not really financially literate and we’re asking them to make financial decisions that have some long-term consequences. To me, that’s an indication that we need to find ways to improve the decision-making process for everyone, but especially young people.”

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].