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Personal Finance

National Study by FINRA Foundation Finds U.S. Adults’ Financial Capability Has Generally Grown Despite Pandemic Disruption

Father and child

On many measures of financial capability, U.S. adults generally fared better in 2021 than in the decade leading up to the pandemic, according to the FINRA Investor Education Foundation’s National Financial Capability Study. However, the research also shows that Americans’ financial well-being remains uneven across different demographic groups.

The study adds to a growing body of evidence that many U.S. adults were able to fortify their personal finances during the COVID-19 pandemic, despite the many economic disruptions it has triggered. At the same time, the research shows that some segments of the population that have historically struggled financially continued to do so.

The study also found that higher financial literacy is associated with greater financial capability, underscoring the importance of promoting high-quality financial education.

Key Findings

Report findings include the following:

  • Overall, Americans’ savings and ability to pay bills increased, but pandemic impacts on job and income stability were significant. Fifty-three percent of respondents reported having three months of emergency savings in 2021, compared to 49% in 2018, and 35% in 2009. Further, 54% of respondents said they did not find it difficult to cover expenses and pay bills, compared to 50% in 2018 and 36% in 2009. But 20% of respondents indicated that they were laid off or furloughed in 2020 or 2021 due to the pandemic, and 26% experienced a large, unexpected drop in income.

  • Stimulus payments prompted by the pandemic might account for a portion of the financial resilience documented in the 2021 study. Stimulus funds were most frequently used to make purchases or pay bills (59%). Many Americans added the money to savings or used it to pay down debt (38% and 33%, respectively).

  • Americans whose jobs were affected by the pandemic faced greater financial obstacles. Of those who were laid off or furloughed due to COVID-19, 64% reported difficulty covering expenses and paying bills, compared to only 39% of those who were not laid off or furloughed. Those laid off or furloughed also had substantially higher levels of financial anxiety and were much more likely to overdraw their checking account (38% compared to 17%) and fall behind on mortgage payments (40% compared to 10%).

  • Divides continue to exist between those prospering and those struggling. Younger adults, those who have a high school degree or less, and those who identify as African American or Hispanic/Latino were most likely to experience unexpected income drops in 2021. Compared to white adults, a much higher percentage of African American and Hispanic/Latino adults lack health insurance (18% for African Americans and 19% for Hispanics/Latinos compared to 10% for whites), and this lack of health insurance is tied to greater levels of past-due medical bills. Further, African American adults are more than twice as likely to be unbanked compared to their white counterparts (13% compared to 6%).

  • Financial knowledge matters. Respondents with higher financial literacy (scoring above the median on a seven-question financial literacy quiz) were more likely to make ends meet than those with lower financial literacy. They spent less than their income (53% vs. 35%) and set aside three months’ worth of emergency funds at higher levels (65% vs. 42%). Those with higher financial literacy were also more likely to have taken steps to plan for their long-term financial future by, for example, calculating retirement savings needs (52%, compared to 29% among those with lower financial literacy) and opening a retirement account (70% vs. 43%).

In addition to these findings, the National Financial Capability Study provides a rich, deep source of data—spanning a dozen years—that can be used by academics and others to conduct research and facilitate greater understanding of financial behavior and attitudes among U.S. adults. The FINRA Foundation itself conducts extensive research and partners with academic and other institutions to perform analyses that lead to better, more informed efforts to help U.S. households with money management.

Access the full 2021 report, datasets, survey instrument and methodology, and more.