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From Banking and Finance Law Daily, May 26, 2016

Fed survey: Not all Americans see signs of improvement

By Lisa M. Goolik, J.D.

The Federal Reserve Board’s latest Report on the Economic Well-Being of U.S. Households paints a “contrasting picture” of the financial well-being of American families. While aggregate-level results showed several signs of improvement in 2015, individuals with lower incomes, racial and ethnic minorities, and individuals with parents of modest financial means reported greater financial challenges in 2015. More than 5,600 respondents completed the survey, which informs the Fed and other government agencies about consumer financial behavior and opinions.

Improvement overall. Sixty-nine percent of respondents said they are either "living comfortably" or "doing okay," up 4 percentage points from 2014 and up 6 percentage points from 2013. Of non-retired adults without a disability, 77 percent believe they have the skills necessary to get the kind of job that they want now—an increase of 10 percentage points from the 2013 survey results.

As for savings and credit, 68 percent of non-retired respondents saved at least a portion of their income in the prior year, while 75 percent of respondents were somewhat or very confident in their ability to obtain a credit card were they to apply for one.

Economic challenges. However, some families continue to struggle financially and feel excluded from economic advancement—31 percent, or approximately 76 million adults, reported they are either “struggling to get by” or are “just getting by.”

Further, 46 percent of adults said they either could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money. To that point, 43 percent of adults with a family income under $40,000 do not have a bank account or use an alternative financial service.

Commenting on the conflicting results, Fed Governor Lael Brainard stated, “It's important to identify the reasons why so many families face continued financial struggles and to find ways to help them overcome them.”

Savings for retirement. The report also indicates that many Americans may be ill-prepared for retirement. Almost one-third of non-retired respondents reported that they have no retirement savings or pension, including 27 percent of non-retired respondents age 60 or older. Moreover, 49 percent of adults with self-directed retirement accounts said they are either “not confident” or only “slightly confident” in their ability to make the right investment decisions.

Higher education. The survey also shed light on the perceived impact and value of higher education. Respondents with higher levels of education were most likely to say that their financial situation has improved over the past year. Thirty-one percent of respondents with at least a bachelor's degree reported an improvement in 2015, while only 22 percent of respondents with a high-school degree or less reported that their well-being improved.

Young adults whose parents did not attend college were 48 percentage points less likely to attend college than are those whose parents have a bachelor's degree. Those that do reported that they are more likely to attend a for-profit institution. However, 49 percent of adults who attended a for-profit institution reported that they would have chosen a different school if they could make their educational decisions again.

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