Board of Governors of the Federal Reserve System

Income

Income is central to most people's economic well-being. The ability to meet current expenses and save for the future typically depends on income being sufficient and reliable. Some families also depend on financial support from, or provide such support to, their family or friends. Frequent changes in the level of family income, referred to here as "income volatility," can be a source of economic hardship. 

Level and Source

Family income in this survey is the income from all sources that the respondent and his or her spouse or partner received during the previous year. Income is reported in dollar ranges as opposed to exact amounts. One-quarter of adults had a family income of less than $25,000 during 2018, and 37 percent had less than $40,000 (figure 2).⁴

Wages and salaries are the most common source of family income: nearly 7 in 10 adults and their spouse or partner received wage income during 2018 (table 4). Yet, many families also receive non-wage income, and the sources of non-wage income vary substantially with age. Among young adults (ages 18 to 29), other paid activities—often referred to as gig work—is the most common source of non-wage income. Among middle-age adults (ages 30 to 59), the percent with gig income is lower, while the percent with interest, dividend, and rental income is higher. Finally, 83 percent of adults age 60 and older received Social Security or pension income. The common sources of income and its distribution are similar to previous surveys.

Table 4. Family income sources (by age)

Financial Support

One in 10 adults received some form of financial support during 2018 from someone living outside of their home. Over one-quarter of young adults receive such support (table 5). Among young adults with incomes under $40,000, nearly 4 in 10 receive some support from outside their home. Conversely, adults age 30 or older are more likely to provide financial support to individuals outside their home. Two in 10 adults ages 45 to 59 financially support others in this way.

Table 5. Receiving and providing financial support outside of the home (by age)

This financial support is mainly between parents and adult children. Of those receiving family support, nearly two-thirds receive it from parents. Of those under age 30 who receive support, 8 in 10 receive it from parents. For many older adults, the flow reverses: among adults age 60 and older who receive family assistance, 6 in 10 receive it from their adult children.

Financial support from family and friends takes many forms. Six in 10 of those receiving financial support receive money for general expenses, and over one-third receive help with their rent or mortgage (figure 3). In addition, nearly one-quarter of all recipients, and over one-third of recipients under age 30, receive help with educational expenses or student loan payments.

Income Volatility

The level of income during the year as a whole may mask substantial changes in income from month to month. The survey considers how mismatches between the timing of income and expenses lead to financial challenges.

Income in 2018 was roughly the same from month to month for 7 in 10 adults. It varies occasionally for 2 in 10, and varies quite often for 1 in 10. Some families can manage these frequent changes in income easily, but for others this may cause financial hardship. In fact, one-third of those with varying income, or 1 in 10 adults overall, say they struggled to pay their bills at least once in the prior year due to varying income.

Those with less access to credit are much more likely to report financial hardship due to income volatility. For example, one-fourth of adults who are not confident in their ability to get approved for a credit card have experienced hardship from income volatility in the prior year, versus 6 percent of those who are confident in their credit availability (table 6). (Access to credit is discussed further in the "Banking and Credit" section of this report.)

Table 6. Income volatility and related hardship (by credit confidence)

More risk-tolerant individuals may be willing to accept income that is more volatile. On a scale of zero to ten, with "zero" being unwilling to take risks and "ten" being very willing to take risks, more risk-tolerant individuals are somewhat more likely to have varying income than those who are less risk tolerant (figure 4). However, the difference in income volatility by risk tolerance is modest. This suggests that factors other than individual risk preferences likely drive income volatility.

 

References

 

 4. The income distribution in the SHED is largely similar to the 2018 March Current Population Survey, although a higher fraction of adults in the SHED have family incomes above $40,000 and a lower fraction have incomes below $40,000. The higher income may partly reflect the fact that unmarried partners are treated as one family in the SHED, while the Current Population Survey treats them as two separate families. Return to text