A Finger on the “Pulse” of Americans’ Financial Health

You can’t change what you don’t measure. But good measurement can be hard to do, especially when it comes to unwieldy concepts like household financial security. After all, does a consumer’s bank account balance, income, credit score, or student loan debt define their financial well-being? Even taken together, these bits and pieces of data rarely paint a complete picture of a person’s financial life.

Financial Health Wonks, Unite!

Fortunately, there is a growing community of researchers and practitioners dedicated to tackling the challenge of measuring financial security. I’m writing this from the CFSI EMERGE Financial Health Forum in Scottsdale, Arizona, where hundreds of financial institutions, nonprofit financial coaching organizations, financial technology firms, and researchers come together to share techniques and insights on consumer financial health. AARP’s CEO Jo Ann Jenkins addressed the crowd Tuesday afternoon, emphasizing that earning consumers’ trust starts with understanding them on a personal level. Customers, she said, “expect you to really know them—not to see them as merely transactions or statistics, but as individuals with whom you have a relationship.”

Measuring What Moves the Needle on Financial Health

Here in Scottsdale, Jo Ann also highlighted AARP’s sponsorship of a new major research initiative dedicated to measuring financial health. The CFSI US Financial Health Pulse is an annual survey of Americans’ financial wellbeing that measures their behavior in four critical areas: saving, spending, borrowing, and planning. The Pulse is unique because over three years it will follow respondents and will incorporate some consumer data, such as bank accounts and credit cards, from survey respondents who agree to share it. With rich insights from the Pulse, organizations like AARP can better understand consumers’ needs and whether policy and programmatic interventions are moving the needle on financial health.

What We’re Learning from the US Financial Health Pulse

The AARP Public Policy Institute’s early analysis of the Pulse baseline survey data shows a remarkable link between short- and long-term financial wellbeing. We find that Americans who have an emergency savings account—be that in cash, in the bank, or in some other form—are two and a half times more likely to be confident in their long-term financial outlook compared to those who do not have emergency savings. This data reinforces our hunch that policy and market solutions designed to be flexible enough to help consumers cover short-term needs while investing for long-term security could go a long way toward improving financial health.

The Financial Health of Low-and Moderate-Income Americans over 50

In the coming months, the AARP Public Policy Institute will publish a report on the role of emergency savings in financial health. In the meantime, check out Redesigning the Financial Roadmap for the Low-to-Moderate Income 50+ Segment, a report from the AARP Foundation and CFSI that looks at the US Financial Health Pulse data through a 50+ lens.

Catherine Harvey is a senior policy advisor at the AARP Public Policy Institute. Her areas of expertise include consumer finances, retirement, and economic inequality.