Board of Governors of the Federal Reserve System

Executive Summary

This report describes the responses to the sixth annual Survey of Household Economics and Decisionmaking (SHED). The goal of the survey is to share the wide range of financial challenges and opportunities facing individuals and households in the United States.¹ For many, the findings are positive; however, areas of distress and fragility remain. The survey also reveals how households view their own financial lives and the many decisions they face, from education to retirement.

Most measures of economic well-being and financial resilience in 2018 are similar to or slightly better than in 2017. Many families have experienced substantial gains since the survey began in 2013, in line with the nation's ongoing economic expansion during that period. Even so, another year of economic expansion and the low national unemployment rates did little to narrow the persistent economic disparities by race, education, and geography.

A key theme in this year's report is exploring the sources and effects of financial fragility across several domains, from employment to banking to managing expenses. Results from the survey show that many adults are financially vulnerable and would have difficulty handling an emergency expense as small as $400. In addition, volatile income and low savings can turn common experiences—such as waiting a few days for a bank deposit to be available—into a problem for some. At the same time, there is evidence of coping strategies, such as supplementing income through gig work and seeking financial support from family members.

The survey continues to use subjective measures and self-assessments to supplement and enhance objective measures. One example is trying to understand how close the economy is to full employment. In addition to asking adults whether they are working, the survey asks if they want to work more and what impediments they see to them working. Health limitations, a lack of available work, and family obligations are often cited as reasons for not being fully employed.

Overall Economic Well-Being

A large majority of individuals report that, financially, they are doing okay or living comfortably, and overall economic well-being has improved substantially since the survey began in 2013. Even so, notable differences remain by race and ethnicity, educational attainment, and geography.

• When asked about their finances, 75 percent of adults say they are either doing okay or living comfortably. This result in 2018 is similar to 2017 and is 12 percentage points higher than 2013.
• Adults with a bachelor's degree or higher are significantly more likely to be doing at least okay financially (87 percent) than those with a high school degree or less (64 percent).
• Nearly 8 in 10 whites are at least doing okay financially in 2018 versus two-thirds of blacks and Hispanics. The gaps in economic well-being by race and ethnicity have persisted even as overall well-being has improved since 2013.
• Fifty-six percent of adults say they are better off than their parents were at the same age and one-fifth say they are worse off.
• Nearly two-thirds of respondents rate their local economic conditions as "good" or "excellent," with the rest rating conditions as "poor" or "only fair." More than half of adults living in rural areas describe their local economy as good or excellent, compared to two-thirds of those living in urban areas.

Income

Changes in family income from month to month remain a source of financial strain for some individuals. Financial support from family or friends to make ends meet is also common, particularly among young adults.

• Three in 10 adults have family income that varies from month to month. One in 10 adults have struggled to pay their bills because of monthly changes in income. Those with less access to credit are much more likely to report financial hardship due to income volatility.
• One in 10 adults, and over one-quarter of young adults under age 30, receive some form of financial support from someone living outside their home. This financial support is mainly between parents and adult children and is often to help with general expenses.

Employment

Most adults are working as much as they want to, an indicator of full employment; however, some remain unemployed or underemployed. Economic well-being is lower for those wanting to work more, those with unpredictable work schedules, and those who rely on gig activities as a main source of income.

• One in 10 adults are not working and want to work, though many are not actively looking for work. Four percent of adults in the SHED are not working, want to work, and applied for a job in the prior 12 months, similar to the official unemployment rate of 3.8 percent in the fourth quarter of 2018.
• Two in 10 adults are working but say they want to work more. Blacks, Hispanics, and those with less education are less likely to be satisfied with how much they are working.
• Half of all employees received a raise or promotion in the prior year.
• Unpredictable work schedules are associated with financial stress for some. One-quarter of employees have a varying work schedule, including 17 percent whose schedule varies based on their employer's needs. One-third of workers who do not control their schedule are not doing okay financially, versus one-fifth of workers who set their schedule or have stable hours.
• Three in 10 adults engaged in at least one gig activity in the prior month, with a median time spent on gig work of five hours. Perhaps surprisingly, little of this activity relies on technology: 3 percent of all adults say that they use a website or an app to arrange gig work.
• Signs of financial fragility—such as difficulty handling an emergency expense—are slightly more common for those engaged in gig work, but markedly higher for those who do so as a main source of income.

Dealing with Unexpected Expenses

While self-reported ability to handle unexpected expenses has improved substantially since the survey began in 2013, a sizeable share of adults nonetheless say that they would have some difficulty with a modest unexpected expense.

• If faced with an unexpected expense of $400, 61 percent of adults say they would cover it with cash, savings, or a credit card paid off at the next statement—a modest improvement from the prior year. Similar to the prior year, 27 percent would borrow or sell something to pay for the expense, and 12 percent would not be able to cover the expense at all.
• Seventeen percent of adults are not able to pay all of their current month's bills in full. Another 12 percent of adults would be unable to pay their current month's bills if they also had an unexpected $400 expense that they had to pay.
• One-fifth of adults had major, unexpected medical bills to pay in the prior year. One-fourth of adults skipped necessary medical care in 2018 because they were unable to afford the cost.

Banking and Credit

Most adults have a bank account and are able to obtain credit from mainstream sources. However, substantial gaps in banking and credit services exist among minorities and those with low incomes.

• Six percent of adults do not have a bank account. Fourteen percent of blacks and 11 percent of Hispanics are unbanked versus 4 percent of whites. Thirty-five percent of blacks and 23 percent of Hispanics have an account but also use alternative financial services, such as money orders and check cashing services, compared to 11 percent of whites.
• More than one-fourth of blacks are not confident that a new credit card application would be approved if they applied—over twice the rate among whites.
• Those who never carry a credit card balance are much more likely to say that they would pay an unexpected $400 expense with cash or its equivalent (88 percent) than those who carry a balance most or all of the time (40 percent) or who do not have a credit card (27 percent).
• Thirteen percent of adults with a bank account had at least one problem accessing funds in their account in the prior year. Problems with a bank website or mobile app (7 percent) and delays in when funds were available to use (6 percent) are the most common problems. Those with volatile income and low savings are more likely to experience such problems.

Housing and Neighborhoods

Satisfaction with one's housing and neighborhood is generally high, although notably less so in low-income communities. Renters face varying degrees of housing strain, including some who report difficulty getting repairs done or being forced to move due to a threat of eviction.

• While 8 in 10 adults living in middle- and upper-income neighborhoods are satisfied with the overall quality of their community, 6 in 10 living in low- and moderate-income neighborhoods are satisfied.
• People's satisfaction with their housing does not vary much between more expensive and less expensive cities or between urban and rural areas.
• Over half of renters needed a repair at some point in the prior year, and 15 percent of renters had moderate or substantial difficulty getting their landlord to complete the repair. Black and Hispanic renters are more likely than whites to have difficulties getting repairs done.
• Three percent of non-homeowners were evicted, or moved because of the threat of eviction, in the prior two years. Evictions are slightly more common in urban areas than in rural areas.

Higher Education

Economic well-being rises with education, and most of those holding a postsecondary degree think that attending college paid off. The net financial benefits of education are less evident among those who started college but did not complete their degree; the same is true among those who attended for-profit institutions.

• Two-thirds of graduates with a bachelor's degree or more feel that their educational investment paid off financially, but 3 in 10 of those who started but did not complete a degree share this view.
• Among young adults who attended college, more than twice as many Hispanics went to a for-profit institution as did whites. For young black attendees, this rate was five times the rate of whites.
• Given what they know now, half of those who attended a private for-profit institution say that they would attend a different school if they had a chance to go back and make their college choices again. By comparison, about one-quarter of those who attended public or private not-for-profit institutions would want to attend a different school.

Student Loans and Other Education Debt

Over half of young adults who attended college took on some debt to pay for their education. Most borrowers are current on their payments or have successfully paid off their loans. However, those who failed to complete a degree, and those who attended for-profit institutions, are more likely to have fallen behind on their payments.

• Among those making payments on their student loans, the typical monthly payment is between $200 and $299 per month.
• Over one-fifth of borrowers who attended private for-profit institutions are behind on student loan payments, versus 8 percent who attended public institutions and 5 percent who attended private not-for-profit institutions.

Retirement

Many adults are struggling to save for retirement. Even among those who have some savings, people
commonly lack financial knowledge and are uncomfortable making investment decisions.

• Thirty-six percent of non-retired adults think that their retirement saving is on track, but one-quarter have no retirement savings or pension whatsoever. Among non-retired adults over the age of 60, 45 percent believe that their retirement saving is on track.
• Six in 10 non-retirees who hold self-directed retirement savings accounts, such as a 401(k) or IRA, have little or no comfort in managing their investments.
• On average, people answer fewer than three out of five financial literacy questions correctly, with lower scores among those who are less comfortable managing their retirement savings.

 

References

 

 1. The latest SHED interviewed a sample of over 11,000 individuals—with an online survey in October and November 2018. The anonymized data, as well as a supplement containing the complete SHED questionnaire and responses to all questions in the order asked, are also available at https://www.federalreserve.gov/consumerscommunities/shed.htm. Return to text