Americans’ Financial Security and Mobility: Key Factors

  • July 28, 2017
  • by Charles Babington

Pew’s research finds that most Americans are more interested in financial stability than in trying to get ahead.

Pew project: Financial Security and Mobility

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Despite signs of an improving U.S. economy, large numbers of families feel deeply uneasy about their financial situation and are ill-prepared to handle expenses that take them by surprise. These realities disturb the sleep of countless people who don’t benefit from a booming stock market or rising home prices.

When asked whether it’s more important to have financial stability or to move up the income ladder, 92 percent of Americans choose security. In short, they simply want to avoid losing ground.

These are among the most recent findings of The Pew Charitable Trusts’ ongoing research into the household financial security and mobility of U.S families. This project works to understand the financial lives of Americans, identifying the most vulnerable households and the reasons for that vulnerability. Its findings can help inform the public and policymakers on ways to improve Americans’ financial well-being.

The findings underscore the degree to which families that appear secure—those with, say, a steady job, a good car, and a house—can live so close to a financial precipice that one bit of bad luck might send them toppling. The factors contributing to this insecurity include people’s expenditures outpacing income, not the least of which is higher housing costs; difficulty saving for retirement and other needs; and struggles in making financial plans when incomes vary unpredictably from one year to the next, as they often do.

“We cannot expect families to be upwardly mobile if they’re not first economically secure,” says Erin Currier, who directs Pew’s project on family financial security and mobility. This raises questions, she says, about the American ethos that “you can get ahead if you play by the rules.”

“Families are really struggling in their day-to-day finances across the board,” Currier says. “If we can work with policy and programs to shore up their financial security, then we’ll go a long way toward enhancing their ability to move up the economic ladder.”

Ray Boshara, who often consults with Pew and directs the Federal Reserve Bank of St. Louis’ Center for Household Financial Stability, says the two organizations “have done a good job of documenting declining upward mobility in the United States. Now the hope is that more policymakers will turn their attention to it.” Among the Fed’s findings is that about 44 percent of Americans can’t meet a $400 expense without borrowing, selling something, or paying the amount in installments over time.

Pew first began research on the state of the American Dream nearly a decade ago. More recently, to better understand family finances, Pew developed a nationally representative survey of 7,845 adults, interviewing them in 2014 and, with the support of the W.K. Kellogg Foundation, re-interviewing 5,661 of them a year later. The project also conducted focus groups and individual interviews in several U.S. cities to better understand Americans’ perceptions of their financial lives and the strategies they use to get by. Pew’s reports on the subject also incorporate important data from other major research groups and the federal government.

People in the focus groups gave voice to the way financial unease undercuts a family’s happiness and can even threaten its stability.

“I think that financial stress is the most important of any stresses in a household,” a Buffalo-area resident told the researchers. “It creates relationship problems.”

A participant at an Orlando focus group spoke wistfully of financial security. “I notice that people who have money are a lot more stress-free, more happy, more outgoing, because they don’t have to worry,” this participant said, adding: “We work full time, take care of kids, bills. And we are stressed.”

Great Recession still reverberates

The Great Recession hit nearly a decade ago, but many Americans still struggle to recover from its effects. By 2014, median household income had fallen 13 percent from 2004 levels, but family expenditures had increased by nearly 14 percent.

Only 46 percent of the respondents to Pew’s 2015 survey reported making more money than they spend. About the same percentage said they had consistent and predictable household bills and income month to month.

All of this makes it harder to save money, an issue of deep concern for millions. In fact, 1 in 3 families report having no savings at all. That includes 10 percent of those with annual incomes above $100,000—an important reminder that income alone doesn’t determine wealth or financial security. Two in 5 households don’t have enough liquid savings to cover a sudden $2,000 expense.

A large majority of U.S. households acknowledge that they don’t save as much money as they believe they should. Minority families are especially hard-pressed: One-quarter of black households would have only $5 left over if they liquidated all their financial assets.

More than half of U.S. households (56 percent) say they worried about their finances over the past year. The most frequently reported financial worries include lack of savings (83 percent), not having enough money to cover expenses (71 percent), and not having enough money to retire (69 percent).

All these factors make it hard for many Americans to plan for—or even have hopes for—the future, says Bob Friedman, founder of the Corporation for Enterprise Development, a Washington-based organization that works for policies to create economic opportunity and end poverty.

“People need an economic place to stand,” says Friedman, who has studied Pew’s research. “They need some savings to absorb shocks, to have a reason to believe they have a future.” But it’s difficult, he says, especially for lower-income families. Those in the bottom 20 percent of income, he says, pay an average of $2,400 in annual interest, fees, and fines for bank services.

Several key factors determine Americans’ financial security and mobility, or lack thereof.


Overall, U.S. income and earnings have grown substantially over the past four decades. But during the 10 years ending in the Great Recession of 2008-09, they slowed dramatically. The typical worker had wage growth of 22 percent between 1979 and 1999, but just 2 percent from 1999 to 2009.

More recently, wage growth has improved. The Census Bureau found that the median household income increased by 5.2 percent from 2014 to 2015, with gains across all income levels.

But this good news about income growth is tempered by not-so-good news about household spending.


Americans ramped down their spending during the Great Recession and a bit after, but they’ve loosened their purse strings in recent years. Overall median household expenditures grew by about 25 percent between 1996 and 2014, returning to pre-recession levels.

While robust spending is generally good for an economy, the problem is that income growth has not kept pace for many families.

Many families spend large portions of their income on basic necessities, especially housing. This is particularly true for low-income families: Households in the lower third of the income bracket spent 40 percent of their income on housing. Renters in that third spent nearly half of their income in 2014 on housing.         

Because basic necessities absorbed so much of their income, households in this lower-income tier spent considerably less than their middle- and upper-income counterparts on discretionary items, such as dining out and entertainment.

While all households had less slack in their budgets in 2014 than in 2004, lower-income households went into the red. In 2004, typical households at the bottom had $1,500 of income left over after expenses annually. By 2014, this figure had decreased by $3,800, putting them $2,300 in the hole.

The lack of financial flexibility, Pew’s research finds, threatens low-income households’ financial security in the short term, and it hurts their economic mobility in the long term.

Income volatility

Pew’s research has found that many families face significant changes in income from one year to the next. More than a third of U.S. households experience year-over-year income swings of more than 25 percent.

Only 47 percent of respondents to the 2015 survey said they had consistent and predictable household bills and income month to month—a level of volatility that makes it difficult for families to plan, pay regular expenses, save, or pay down debt.

Pew researchers, delving into this relatively unexplored issue, found that families experiencing income volatility—whether a gain or a loss—report worse financial well-being and less savings than those with stable income.

“This finding shows that volatility alone makes it harder to plan, to budget, and that reduces financial security,” says Pew’s Currier.

And income volatility occurs in all demographic groups. At least 1 in 4 households across all income, educational attainment, race, and other groups experienced substantive income shifts in the one-year period between 2014 and 2015.

This volatility is often dramatic. At the median, the incomes of households with losses declined by 49 percent. Families with gains boosted their incomes by 56 percent. Among households that saw gains, the median amount was $20,500. Among those with losses, the median amount was $25,000.

Financial shocks

Many American households share an ominous vulnerability. Even those with higher incomes can be disrupted by just one financial setback, or shock, such as a pay cut, hospitalization, or car or home repair that can’t be postponed.

Six in 10 households reported experiencing a financial shock in the year before Pew’s Survey of American Family Finances was conducted, and more than half of those struggled to make ends meet as a result. The typical household spent $2,000, or about half a month’s income, on its most expensive shock. At the median, just one such event can wipe out most or all of a household’s savings, which can take months or longer to rebuild. Households without liquid savings sometimes incur debt or turn to friends and relatives for help, but these approaches can cause financial difficulty in the future and strain relationships.

As a participant at a focus group in Columbia, South Carolina, said: “Any one thing can happen to anybody at any given point, and you just never know where you will end up being. Like, you think you are the most prepared person until something happens, and then you realize just how unprepared you really were.”

After suffering a financial shock, households had lower savings and higher credit card debt than those that did not have one. The median household that experienced a shock had almost $4,000 less in liquid savings, could replace only about half as much income using liquid savings, and was more likely to carry a monthly balance on credit cards than was an unaffected household. These deficits did not necessarily result directly from the shock, but the findings demonstrate how a single event might damage households in unexpected and long-lasting ways.


Pew’s research shows that income alone, no matter how consistent, does not guarantee that households can accumulate a sufficient financial cushion to protect themselves from the unexpected. They need some savings, and that’s one of the toughest goals for Americans to achieve.

Overall, the typical household cannot replace even one month of income with liquid savings, and even pooling all of its financial resources could replace only about four months of income. This lack of savings tops the list of financial worries in many homes.

A San Francisco Bay Area resident commented on the inability to save this way: “I think because I just have so much to pay off in terms of debt that I can’t save. Every time I think about saving, I’m like, ‘Oh, I really should pay this off or get this instead.’”

Low-income households are particularly unprepared for emergencies. The typical family at the bottom of the income ladder has the equivalent of less than two weeks’ worth of income in checking accounts, savings accounts, and cash on hand.


One of the biggest shifts in American families’ balance sheets over the past 30 years has been the growing use of credit and the resulting indebtedness.

In the years leading up to the Great Recession, the average household at the middle of the wealth ladder more than doubled its mortgage debt. Although Americans’ overall debt has decreased since then, it remains higher than it was in the 1990s. Student loan debts are part of this growth.

Perhaps not surprisingly, debt hits low-income households especially hard. Their liabilities grew far faster than their income in the aftermath of the Great Recession. Their debt was equal to just one-fifth of their income in 2007, but that proportion grew to one-half by 2013. Even middle-wealth households held $7,000 more in debt, on average, in 2013 than in 2001 and previous years.

“Pew has long cared about the health and status of the American Dream, and our work clearly shows that for many Americans, the root of achieving that dream is being financially secure,” says Currier. Pew’s research finds that typical Americans don’t have grandiose visions of financial security. Many say they just want to be able to pay their bills, set something aside for savings, and sleep peacefully at night.

“It would be nice not to worry,” said a Pittsburgh-area resident. “Everybody’s dream is just to breathe.”